State of the Insurance Market:
2025 Outlook

Property

The improvement in the property insurance market continued into Q1 2025, despite back-to-back hurricanes in September/October 2024 and the Los Angeles area wildfires in January 2025.

The favorable market environment is due to new capacity entering the market, increased competition among insurers, and better than expected January reinsurance renewals. Most clients should continue to see favorable outcomes in their 2025 property renewals, compared to the volatility that characterized the property market in 2023 and prior years.

Market Conditions

 

Generally, the property market has improved for most clients. Even challenging occupancies, like frame habitational accounts, which experienced some of the most dramatic rate increases in prior years, are seeing rate decreases. This is due to increased competition in the surplus lines market via new capacity, increased competition from the London market, and more aggressive underwriting. Accounts of higher risk quality who experienced less volatility previously benefit from market conditions, but with less significant rate changes.

These market conditions are set against the backdrop of what was another active catastrophe (CAT) season in 2024 and the Los Angeles wildfires in January 2025. Swiss Re estimates CAT losses in 2024 will exceed $135B, the fifth straight year of CAT losses exceeding $100B. $100B plus in annual CAT losses appears to be the new normal. Despite this fact, rates have yet to be significantly impacted. Reinsurers remain profitable because of the dramatic restructuring of attachment points and capacity that took place in previous years.

The devastating wildfires in Los Angeles reinforced that wildfire is now a significant CAT peril the industry will have to contend with. Prior to this event, wildfire exposures had been subject to increased scrutiny and more conservative underwriting. This will certainly continue, rates for exposed properties will increase and capacity will be more closely managed. However, despite loss estimates ranging from $20B to $40B, this was mostly a personal lines event, so the impact on the broader commercial property market remains to be seen.

To date, we have seen little to no impact on rate reductions in the broader, non-wildfire exposed market. Upcoming reinsurance renewals will provide additional clarity on the impact on market conditions moving forward.

In the first few months of 2025, rates continue to improve, with most renewals seeing rate decreases. These positive outcomes are typically driven by:

  • Good risk quality
  • Favorable loss experience
  • Adequate property and business interruption values

The following factors continue to affect the property market:

  • Depending on the 2025 hurricane season, total CAT losses this year could push $200B. An active hurricane season would create pressure on rate and capacity for southeast coast exposed properties, and potentially the broader market as well.
  • Insurers continue to push for percentage deductibles for severe convective storm (SCS) perils in high and moderate-hazard areas.
  • Insurers remain focused on adequate insurance-to-value (ITV), although year-over-year indices have decreased significantly from post-pandemic highs.

Coverage Considerations

 

The improved market environment is expected to continue, with the caveat that conditions could deteriorate if the market is hit by significant hurricane activity and SCS losses as the 2025 CAT season unfolds. In the interim, clients should take advantage of the favorable market conditions:

  • Absent a strong renewal offer from your incumbent insurer on a preemptive basis, conduct a thorough marketing effort to leverage the increase in capacity and competitive underwriting environment.
  • If applicable, push to remove coinsurance provisions and occurrence limit of liability (OLL) endorsements at renewal, so blanket limits apply.
  • If insurers won’t delete OLL endorsements, increase margin clauses to 25%.
  • Request increased sublimits.
  • Consider parametric insurance as an alternative to or additional component of an existing risk transfer strategy to address challenges with specific catastrophe perils – earthquake, flood, hail, wildfire, and wind.

Property: Rate Forecast

 
Rate Forecast
High Quality Risk/No/Limited CAT/Favorable Loss History: -30% to Flat
Poor Quality Risk/CAT/Unfavorable Loss History: -25% to +10%

Recommendations

 
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Work with a qualified appraisal firm to ensure that building values are accurate.

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Start the renewal process as early as possible — 90 to 120 days in advance.

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Address and document compliance with outstanding property loss prevention recommendations.

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Keep track of capital improvement expenditures and budgets, so they can be used to demonstrate an ongoing commitment to risk improvement.

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Have a comprehensive business continuity plan in place.

Property-Recommendations-SOTM-2024
Property-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.