State of the Insurance Market:
2025 Outlook

Through the last quarter of 2024, and so far through the first quarter of 2025, we see softening rates in the property market. Some more difficult placements, due to high limits and proximity to water have seen competition from Lloyd’s of London and nonstandard markets driving price combativeness. This trend will be challenged by the recent catastrophic (CAT) fires in California. Geographic location still plays a role in carrier appetite.

Carriers are changing some of their practices for property insurance. Some insurers are analyzing their density exposure in each area; this is most seen in urban environments for large property holdings. Other carriers no longer concentrate on correct valuations of the replacement cost of buildings. Instead, they utilize annual inflation factors to valuations they have implemented in recent years.

It’s recommended nonprofits who question their carrier's valuation reevaluate property values themselves, through professional appraisals to control this exposure and ensure insurance policies cover at least 80% of the property value.

Unfortunately, carriers struggle with adequate rate evaluation on other lines of coverage. Over the last several years many carriers have sought rate increases on the commercial auto line. While carriers experienced success with this approach, and are comfortable with current rates, those that waited are catching up.

Most significantly, umbrella liability is seeing rapidly rising rates, as carriers perceive this line of coverage to be actuarially complex to predict. Given the reasons above carriers continue to re-evaluate their exposure.

The trend for carriers to offer lower limits to insureds on renewal continues. Carriers are reluctant to offer higher than a maximum of $5M in limits and sub-limiting the abuse and professional lines to $2M to $3M in total. In some renewals, carriers do not offer any umbrella limits resulting in the need to seek limits from nonstandard carriers. This also occurs when insureds want higher than offered limits. The result is higher premiums and potentially more restrictive terms of coverage.

Unpredictable claim settlements, litigation inflation (i.e. claim defense costs), and litigation financing continue to plague the industry. While general liability rates remain flat to modest increases, there’s still demand for rate on abuse and professional lines.

Even with these challenges, there are several bright spots for nonprofit clients in the management liability and cyber lines.

The 2024 trend continues and has even improved. Nonprofit directors and officers (D&O)/employment practices liability (EPL) renewals are seeing either flat premiums, or in many cases a reduction in premium. Carriers also continue to offer reductions in retentions to secure accounts.

Cyber liability is even more encouraging, with a very competitive market. Renewals are coming in at least flat, but in many cases with significant premium decreases. If you have not marketed this line of coverage, it should be considered. If you have not acquired coverage, it should be considered. Two factors are creating this competitiveness: increased capacity and enforcement of enhanced risk management oversight.