State of the Insurance Market:
2025 Outlook

Healthcare

Many factors, including changes in healthcare delivery, tort law, litigation environment, the rise of nuclear verdicts, social and economic inflation, and changes in reimbursement from fee-for-service to value-based care are impacting the healthcare industry.

Additionally, patient volumes are down slightly year over year, and operating margins are improving.

However, these issues are not across the industry. Generally, larger systems are faring better, while smaller, community-based hospitals face challenges.

We’ve identified several key factors that impacted market conditions for the healthcare industry in the first half of 2025.

Property & Casualty

 

Market Conditions

  • Mergers and acquisitions (M&A): According to Kaufman Hall the volume of health system mergers continues to trend upwards towards pre-pandemic levels with 72 announced transactions. Acquisitions across payer/provider lines have resulted in United Health Group (UHG) subsidiary Optum being the largest single employer of physicians in the U.S. CVS also employs many physicians through its Oak Street subsidiary. Regulators and legislators are increasingly scrutinizing private equity investments in healthcare. Several high-profile cases like UnitedHealth Group’s $3.3B attempt to acquire Amedisys were blocked due to antitrust concerns and have received negative publicity, and several members of Congress are pushing for legislative change that would create higher barriers to entry for private equity. One such bill is the Health Over Wealth Act, which aims to increase the transparency in private equity-backed healthcare ventures, proposing stringent regulations, reporting on debt and executive pay, and limiting asset-stripping practices, as well as obtaining a license from the Department of Health and Human Services (HHS) before purchasing or investing in a healthcare entity.
  • Staffing shortages and burnout: Staffing shortages continue to be a challenge for healthcare organizations, impacting the cost of labor, productivity, and burnout rates. Healthcare IT Today states that in 2025 the U.S. is projected to face a shortage of 200K to 450K nurses, equating to a 10-20% gap in the workforce required for direct patient care. These shortages impact almost all clinical categories but continue to be most prevalent in nursing. During the pandemic, healthcare providers and hospitals turned to pro re nata nurses and travel nurses to maintain staffing levels, which led to a significant increase in labor costs. Shortages increase burnout among staff, leading to further strain. Many healthcare organizations are enhancing benefits and rewards. Investments in programs such as subsidized childcare and tuition reimbursement for key clinical staff can improve retention.
  • Cyber incidents: Hospital and health system vendors continue to be targeted in cyberattacks, creating data breaches that ultimately affect healthcare organizations. In 2024, health systems across the U.S. reported that patients' protected health information was compromised due to data breaches at vendors they work with. In May 2024, a ransomware attack on St. Louis, MO-based Ascension forced Ascension to divert ambulances, close pharmacies, take critical IT systems offline, and resort to pen and paper to record patient information. The most significant cyberattack to date was against UHG’s Change Healthcare in February 2024. As a result of this and other high-profile cases, ransomware attacks have become an enforcement priority for the U.S. Department of Health and Human Services (HHS). HHS is emphasizing the importance of safeguarding patient information and ensuring healthcare entities are prepared to protect these records from cyberattacks. Federal regulators recently fined a Pennsylvania-based healthcare system $950,000 and imposed a corrective action plan for potential Health Insurance Portability and Accountability Act (HIPAA) violations linked to a 2017 ransomware incident.
  • Artificial intelligence (AI): The role of AI in healthcare continues to grow, driving advancements in diagnostics, treatment planning, and operational efficiencies. However, this progress is paralleled by an increase in AI-driven risks within the cybersecurity landscape. As AI-driven cybercrime evolves and regulatory scrutiny surrounding AI practices increases, we expect the insurance market to devise a cohesive approach to address these challenges.

Coverage Considerations

Current trends are expected to persist with all available data indicating the market will continue to harden. The brief respite in claims during the pandemic is over, and we have seen claims frequency and severity resume where they left off. We anticipate incremental premium increases to continue for the foreseeable future to offset the risks of nuclear verdicts. Additionally, some carriers seek increases in self-insured retentions, and many are cutting back on capacity. This is becoming commonplace for many renewals.

  • Professional liability: While the number of claims has bounced back to pre-COVID-19 numbers and remains stable compared to pre-pandemic numbers, the number of claims over $10M continues to rise. Medical malpractice payouts increase as more nuclear verdicts (+$10M), and thermonuclear verdicts (+$25M) are reached. This trend will continue and accelerate, leaving insurance carriers vulnerable to significant losses. If this risk grows, it may change underwriting and make acquiring coverage more difficult.

The incidence and severity of sexual abuse and molestation (SAM) claims has increased significantly across the country, particularly with academic medical centers. The impact of these claims on the healthcare system from a financial and reputational perspective is substantial. For example, a 2021 obstetrics case involving 700 claimants in California for $1.1B, a 2021 gynecology case involving 79 claimants in NY for $71.5M, and a 2020 behavioral health case involving one claimant in IL for $535M. Carriers are restricting SAM coverage in a number of ways including increasing the hospital professional liability (HPL) retention by a multiple of the current retention, applying coinsurance, and/or reducing the limit.

As nurse practitioners and physician assistants become more prominent in healthcare, medical malpractice markets seek more appropriate pricing that better aligns with the adapting roles, as we’ve seen in 2024, with significant rate increases for these policies. Similarly, we see an increase in per diem nursing and 1099 contract employees and recommend carefully considering these employees’ coverage options.

Other areas coming under greater underwriting scrutiny are compounded GLP-1s (a class of drugs used to treat type 2 diabetes and, in some cases, obesity) and physicians doing 100% telemedicine work. While some carriers continue to cover these exposures, others are opting out which means there are limited carrier options and sometimes higher pricing in the excess and surplus lines market.

  • Excess liability/reinsurance: The excess liability/reinsurance marketplace continues to change, with most carriers reducing their capacity. The number of carriers participating on an excess tower has doubled or in some cases tripled. Increasing the utilization of quota share arrangements and combining U.S. and international markets is necessary to build capacity. Additional carrier participation brings challenges. For example, since each carrier’s coverage form/reinsurance certificate is different, maintaining consistent coverage throughout the tower becomes more difficult. In the event of a claim impacting multiple layers, communication with all carriers involved becomes time-consuming and laborious.
  • Property: Healthcare organizations faced pressure over the past couple years to increase property values due to inflationary pressures. The percentage increases required by carriers has moderated. Capacity is limited for catastrophic exposures and risks with a large concentration of frame construction. Carriers continue to seek higher deductibles, especially for wind/hail, due to increased convective storm activity. Organizations may need to layer policies from multiple insurers to secure sufficient coverage.
  • Cyber: The cyber landscape continues to evolve rapidly. While capacity remains, ransomware attacks are resurging, raising insurers’ concerns. Organizations with strong security controls are seeing stable rates; however, those with average to weak controls may experience rate increases. Ransomware claim activity persists, and business email compromise and funds transfer schemes are an ongoing issue. Insurers are also concerned about the potential for a systemic event where a threat actor infiltrates a cloud or other service provider, which then compromises customers’ security.
  • Workplace violence: Workplace shootings and violent attacks continue to be a concern for healthcare organizations. Healthcare workers are five times more likely to sustain workplace violence injuries than employees in other fields. Increasing claims from labor shortages is a growing concern as employers try to maintain the same productivity levels despite employing fewer people. The growing aging workforce in healthcare contributes to larger workers compensation claims as older workers, when injured, tend to have more severe injuries and slower recovery times.
  • Auto: Many carriers are reluctant to offer stand-alone auto coverage for healthcare risks. Most auto carriers will only consider writing coverage with a supporting line of business. There continues to be a minimal appetite for ambulance/patient transport risks in the marketplace.

Recommendations

 
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Start renewals early to allow time for any obstacles or negotiations should unexpected challenges arise and have a broker review market options every few years.

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Develop enhanced benefit systems for providers, standalone coverage for allied healthcare providers, and clearly define coverage options for contract employees.

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Implement robust patient safety/risk management programs and use data analytics to determine what those programs should look like.

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Establish clear governance policies on how AI use will be monitored at a corporate level. Develop a clearly defined strategy for integrating AI, before implementation, ensure data infrastructure can support such initiatives. Invest in cloud computing, data analytics, and machine learning tools.

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Develop comprehensive safeguards, including security assessments and implementation of no-tolerance policies to promote a safer workplace for employees.

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Implement IT systems to meet pixel tracking requirements, ensuring compliance with healthcare regulations like HIPAA to protect patient data and be prepared to provide proof of proper protocols.

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Maintaining a good working relationship with brokers is critical. Carriers need to be aware of everything a practice is doing, otherwise there may be uncovered exposures.

Team_ medical analysts and doctors consulting with paperwork of graphs_ data and charts in hospital conference room. Closeup of healthcare staff discussing statistics_ results and innovation strat

Managed Care and Accident & Health Reinsurance

 

Market Conditions

There is ample capacity in the accident and health space in the medical excess and provider excess of loss market with some markets offering aggressive pricing, terms, and conditions. However, other markets are trying to price for current/future exposures and limiting risk through disclosure/lasering. Trends impacting the insurance and reinsurance market include:

  • Increased Food and Drug Administration (FDA) approvals for cell therapies, gene therapies, and other extremely high-cost specialty drugs, higher than expected medical loss ratios for Medicare Advantage plans, and the continued push towards value-based care.
  • Potentially significant impact on the government programs that rely on federal funding, e.g., Medicaid, ACA, etc.
  • High-cost specialty pharmaceuticals, including cell and gene therapies. Regardless of category, the use of these high-cost drugs translates to increased insurance and reinsurance costs and the potential for the exclusion of members and drugs.
    • Spending on specialty drugs now represents over 50% of total pharmacy spending, even though only 2% to 4% of the population requires a specialty drug.
    • Specialty drugs generally fall into three categories: chronic condition management, acute condition management, and high-cost, one-course cures (i.e., gene therapies).
  • Lack of access to timely and accurate clinical and cost data for underlying populations drastically impacts the ability to effectively direct members to the highest-quality, lowest-cost providers. This results in higher claims costs, higher premiums, and the likelihood that members will be excluded from coverage or coverage will be reduced for failure to disclose or report on a timely basis.

Coverage Considerations

Trends in the insurance and reinsurance space will continue into 2025 and beyond. The FDA is rapidly approving new therapies, and the pipeline of new treatments in clinical trials is substantial. There has been little success in controlling manufacturer pricing for these therapies, and there is no sign of change. Consider a multi-pronged approach to reinsurance, where extremely high-cost/low-frequency gene therapies are carved out and addressed in a program specific to this exposure. This approach should translate to pricing stability across your risks and enable you to manage this emerging but volatile exposure.

During competitive market cycles there may be significant savings offered for one year, but a sustainable, predictable market is one that provides a consistent pricing approach instead of wild swings in rates from year to year.

Recommendations

 
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Understand the risks. Invest in tools and partner with vendors that can provide a line of sight to the exposures within the underlying population.

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Take advantage of the cost-containment solutions that many insurers/reinsurers make available.

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Ensure there are no hidden exclusions or limitations within the policy's body.

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Understand the obligations under any policy. Review all disclosure requirements to ensure they’re being met. If they cannot be met, communicate this to the broker.

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Develop long-term partnerships with reinsurance/risk partners. While price will always be an important factor, there are many other considerations that play an important part in selecting the right reinsurance/risk partner, including: contract/policy language, claims payment, laser and disclosure philosophy.

Management Liability Healthcare (1)-1

Healthcare Rate Forecast

 
Rate Forecast
Healthcare - Management Liability +5% to +10%
Healthcare - Managed Care E&O +10% to +15%
Healthcare - Managed Care, Accident & Health Reinsurance +8% to +20%
Healthcare - Physician Medical Malpractice +5% to +20%
Healthcare - Excess Liability +10% to +15%
Healthcare - Property/Non-CAT Exposures   Flat to +7%
Healthcare - Auto +5% to +10%
Healthcare - Workers' Compensation   Flat to +5%
Healthcare - Primary Professional Liability +10% to +15%
Healthcare-Callout-SOTM-2024

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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.