State of the Insurance Market:
2025 Outlook

Real Estate

Challenges in the commercial real estate space continue to affect owners and operators, with the ongoing volatility of the insurance market adding to the uncertainty. Following a prolonged period of challenging renewals, rate increases, and restrictions in terms, property market conditions have improved considerably.

This has become evident with most well-performing accounts receiving reductions, and improved terms as property insurers have returned to profitable levels in the absence of market-changing catastrophic (CAT) events. Conversely, liability coverage remains challenging as insurers continue to underwrite at a deeper level with increased rates and tightening terms.

Market Conditions

 

In 2024, there were 27 separate natural CAT events in the U.S. with losses exceeding $1B, which places 2024 as the fourth costliest on record, trailing 2017, 2005, and 2022, respectively. According to the National Oceanic and Atmospheric Administration (NOAA), this includes 17 severe storms, five tropical cyclones, two winter storms, one wildfire, and one flooding event. Despite the impact on insurer profitability, property market conditions in 2025 continue to improve, with reductions in rates becoming increasingly common for insureds with favorable loss records. Given the increase in competition, underwriters are more open to negotiation with greater flexibility and improvement in terms becoming increasingly common.

Although market conditions are improving, insurers continue to focus on building valuations, loss mitigation efforts, and carefully tracking exposure accumulations — especially on the heels of the fires in Los Angeles in January 2025. While the conditions of the property market continue to show signs of improvement, it is still considered fragile — meaning a major catastrophic event could slow the trend. With respect to the California wildfires, the total amount of losses to insurers remains undetermined. However, given that most of the losses were sustained at private homes, it is not expected to impact the commercial real estate space in a meaningful way.

The liability market continues to be a challenging environment. Rates for general liability are up year-over-year, which are higher in the lead umbrella and excess liability portions of the overall placement. Lacking tort reform combined with continued nuclear verdicts has led to increased pressure for underwriters to seek rate increases. Crime scores are carefully evaluated, as are the jurisdictional legal dynamics. It is therefore imperative that clients collaborate closely with brokers to create a tailored marketing strategy for the renewal to achieve optimal outcomes.

While we’re seeing encouraging movement in many areas of the country, the West remains an outlier due to capacity constraints, wildfire aggregation and tightening underwriting guidelines.

Coverage Considerations

 

For the property market, it is important to use data analytics and enrichment tools to identify areas of concern that may lead underwriters to restrict terms. For example, it is also important to secure information from clients for older buildings on key items that may need updating such as heating, electrical, and plumbing. Staying proactive with this could avoid potential restrictions in coverage or higher deductibles. Given the recent wildfires in Los Angeles, it is also important to understand what the wildfire scores look like and to make sure that any mitigation measures taken by the insured are well articulated to the marketplace.

Real Estate Rate Forecast

 
Rate Forecast
Property: Soft Occupancies (office, retail, and other well-protected risk) -5% to -20%
Property: Tough Occupancies/Non-CAT   Flat to -10%
Property: Tough Occupancies/CAT-Exposed   Flat to +5% or greater
Liability: General Liability   Flat to +10%
Liability: Auto +5% to +10%
Liability: Umbrella +5% to +15%
Liability: Excess Liability +5% to +15%
Liability: Workers’ Compensation   Flat

Recommendations

 
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Start the renewal process early: Lead with analytics, and leverage technology that enriches exposure information to develop an appropriate narrative that will help execute a comprehensive go-to market strategy.

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Partner with a specialty broker: Work with a broker who has deep experience, resources, and knows the real estate space well. These factors can make all the difference in securing the right coverage and the most competitive rates the marketplace will support.

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Focus on accuracy of data: Ensure that robust information is included in the Schedule of Values. Incomplete and missing information will in many cases default to data that could have an adverse impact on modeling and therefore pricing.

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Develop a loss control plan: For clients with unfavorable loss history, it is important that loss control be engaged as a resource to help build a plan to mitigate future losses and that the plan is appropriately shared in the marketplace as part of the overall narrative.

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Work with a trusted advisor: For programs with high-hazard exposures such as wind, earthquake, flood and wildfire, partner with a specialty broker, model the risk, and get guidance on sufficiency of limits, applicability of deductibles, and insight into what technical pricing underwriters will need.

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Consider pre-underwriting a risk: Before the submission goes to market, ask your broker if there are additional steps you can take to improve your risk profile.

Most importantly, ensure the risk is differentiated, a concise marketing strategy is followed, and the renewal process is started as early as possible.

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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.