State of the Insurance Market:
2025 Outlook

Key macro factors driving market conditions in 2025 include:

• Regulatory environment: Insurance regulators’ primary responsibility is to protect consumers. From a regulatory perspective, 2025 will be a critical year in the insurance sector. Carriers need to manage greater risks, large scale loss events, and additional challenges while maintaining compliance with stronger regulatory demands. State insurance departments continue to address consumer concerns about sharp rate increases and coverage lapses, particularly in CAT-prone states with rising premiums. Increased frequency and severity of natural disasters, particularly wildfires, and hurricanes, are driving insurance costs and prompting regulatory actions. Carriers should anticipate more coverage denial moratoriums from state and federal regulators in higher risk areas. California’s moratorium on policy cancellations after the devastating January 2025 wildfires is a recent example. Increased awareness and education around mitigation efforts will be important to address the availability and affordability of homeowners’ insurance.
• Reinsurance: Carriers purchase reinsurance to limit their loss exposure. Reinsurance is critical to offering stability and coverage availability in areas where there is a heightened risk of frequency and severity of natural disasters. The mid-year 2024 reinsurance renewals saw positive rate adjustments and term improvements. January 1, 2025, reinsurance renewals showed more of a return to normalcy after the challenging conditions of the past two years. Despite improved conditions, reinsurers continue to focus on maintaining disciplined underwriting to ensure profitability and long-term sustainability.
• Excess and surplus lines (E&S): Non-admitted insurance carriers, also known as E&S lines carriers, represent one of the fastest growing segments of the insurance industry due to its flexibility, innovative product approach, and customization. Non-admitted carriers are not subject to many of the same regulatory requirements as those writing business on an admitted basis. However, underwriting discipline is required for these hard-to-place risks. E&S, which is often the only solution for clients in some CAT-prone areas, can address specific coverage circumstances, and aligns well with clients with higher risk tolerance.
• Catastrophe events: According to the National Oceanic and Atmospheric Administration (NOAA) National Centers for Environmental Information (NCEI), there were 27 separate billion-dollar weather and climate disaster events that impacted the U.S. in 2024. Comparing this data to prior years, there’s a significant increase in severe storm activity. 2024 was also the warmest year on record for the contiguous U.S., the third wettest, and saw the second highest tornado count. In addition to the impact of severe weather events, natural disasters directly impact the availability and cost of building materials, fuel, and labor supplies needed to rebuild and repair damaged property.
• Severe weather risks and risk mitigation recommendations: HNW families and individuals often own properties in some of the most weather-vulnerable areas. Conducting an annual review of exposures, risk tolerance, and coverage is essential to managing these risks effectively and safeguarding assets from the growing threat of CAT-events.
• Flood risks: Flooding is the most common and costly natural disaster in the U.S., resulting in billions of dollars in economic losses annually. According to the Federal Emergency Management Agency (FEMA), flooding accounts for 90% of all disaster-related damage and occurs in any state, at any time of the year. Regardless of location, everyone faces some flood risk. As flood threats grow, homeowners should reassess their exposure and incorporate flood insurance into their overall risk management and insurance strategy. Options are available through both the National Flood Insurance Program (NFIP) and private insurers. Exploring both is crucial, as coverage and pricing vary by risk and location. While the NFIP imposes strict limits on coverage, private carriers generally offer higher limits with fewer restrictions, providing more flexibility for high-value properties.