
State of the Insurance Market:
2025 Outlook
Risk Management
As we progress through 2025, organizations face a dynamic risk landscape shaped by evolving climate patterns, escalating claims costs, and emerging systemic threats. This report provides an updated overview of these critical areas and offers strategic recommendations to enhance resilience and mitigate potential losses.
Market Conditions
The increasing frequency and severity of natural catastrophes continue to challenge businesses globally. In 2024, insured losses from natural disasters reached approximately $140B, surpassing the ten-year average of $94B. This upward trend underscores the pressing need for robust risk management strategies.
In January 2025, Los Angeles experienced devastating wildfires, resulting in estimated losses between $30B and $40B. These events highlight the escalating financial strain on organizations and the critical importance of proactive risk assessment and mitigation efforts.
Increased Claims Costs
Several factors are contributing to rising claims costs across various industries:
- Tariffs and Trade War Impacts: We expect Tariffs and potential Trade Wars will have an initial impact on claims costs. Imported goods like steel, auto parts, and construction material costs are expected to rise having a direct correlation on higher costs of repair for auto and property claims and supply chain issues impacting business interruption claims. As repair costs or replacement cost values increase, insurers will have higher claims payouts which will put pressure on premiums.
- Social inflation: Societal factors such as increased litigation and higher jury awards drive insurance costs and have been identified as a significant contributor to escalating liability claims. Litigation funding remains a main driver of legal cost and case volume, approaching $15B in assets with an annual growth rate of 8 to 12%. The fastest growing sector is commercial litigation, which includes business disputes, breach of contract cases, and class actions. In response, several states - including West Virginia, Wisconsin, Georgia, Florida and New York - are implementing or proposing stricter regulations, such as transparency and disclosure requirements, with some even considering outright bans on litigation funding.
- Supply chain disruptions: Ongoing global supply chain challenges led to increased costs for materials and labor, extending repair times and amplifying business interruption losses.
- Technological integration: The rapid adoption of advanced technologies, while beneficial, introduces complexities that can lead to increased operational risks and associated claims.
Systemic Risks
The interconnected nature of modern economies exposes businesses to risks that can disrupt entire industries:
- Cyber and artificial intelligence (AI)-driven threats: The integration of artificial intelligence into business operations has introduced new cybersecurity vulnerabilities. Sophisticated cyberattacks can disrupt operations, compromise sensitive data, and damage reputations.
- Geopolitical instabilities: Rising protectionism and geopolitical tensions contribute to market volatility and operational uncertainties. These factors lead to increased regulatory compliance costs and supply chain vulnerabilities.
Recommendations
To navigate this complex risk environment, organizations should consider the following strategies:

Enhance risk assessment: Implement comprehensive risk analysis frameworks to identify and quantify potential threats, enabling informed decision-making.

Strengthen supply chain resilience: Diversify suppliers and maintain strategic inventories to mitigate the impact of supply chain disruptions.

Invest in cybersecurity: Develop robust cybersecurity protocols and conduct regular assessments to protect against evolving cyber threats.

Foster organizational agility: Cultivate a culture of adaptability to respond swiftly to emerging risks and changing market conditions.

Engage in scenario planning: Utilize scenario analysis to anticipate potential systemic shocks and develop contingency plans accordingly.
By proactively addressing these areas, businesses can enhance their resilience and better position themselves to thrive in the evolving risk landscape of 2025.


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At Risk Strategies, we are hands-on advocates, protecting your most critical assets before losses happen.
Filing large, complex claims with carriers can be an overwhelming experience. We build resilience into your programs to help you recover rapidly after the unexpected occurs.
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Our industry and product line specialists have collaborated to provide an update on current trends and market conditions.
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The contents of this report are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.