US Commercial P&C Insurance Market Adjusts Amid Elevated 2025 Catastrophe Losses

The U.S. commercial property and casualty (P&C) insurance market is undergoing significant adjustments following a series of substantial natural catastrophes in early 2025. Global insured catastrophe losses reached an estimated $50 billion in the first quarter alone, marking one of the highest first-quarter losses on record. Major events such as the Palisades and Eaton wildfires in Los Angeles caused extensive property destruction and insured losses expected to exceed $30 billion. Additional losses arose from severe weather events across the southern and eastern U.S., while a major earthquake in Myanmar led to losses mainly impacting reinsurers.

Despite these elevated catastrophe losses and forecasts anticipating an active hurricane season, insurers and reinsurers remain well-capitalized with stable market capacity. However, the frequency and intensity of wildfires have intensified underwriting challenges, prompting many insurers to raise premiums, limit capacity, or withdraw from high-risk areas. First-half 2025 property insurance renewals indicated increased competition, with some single-carrier programs experiencing rate reductions between 5% and 30%, particularly with London and Bermuda markets driving premium savings.

Certain high-risk property segments—including wildfire-prone locations, older wood-frame residential buildings, wind-exposed structures, food manufacturing facilities, and subsidized housing—continue to face challenges in securing favorable coverage terms or rate decreases. Meanwhile, U.S. P&C insurers reported significantly improved profitability in 2024, with industry earnings nearly doubling to $171 billion, supported by price increases across most lines that offset rising claim costs.

Looking ahead, the market is expected to soften in the second half of 2025 as ongoing capital inflows support expanded coverage and reduced deductibles. However, rising raw material costs and tariffs are reversing prior declines in building and equipment valuations, contributing to upward pressure on insurance premiums. Replacement cost valuations have increased nationwide by 5.5%, with some states experiencing even higher percentage rises, resulting in elevated insured values and premiums.

Efforts to improve insurance availability in high-risk areas rely increasingly on Fair Access to Insurance Requirements (FAIR) plans, yet these programs reveal limitations amid complex damage claims, particularly related to wildfire smoke and soot contamination. On the casualty side, the workers’ compensation market remains profitable but shows narrowing net profit margins due to declining reserve redundancies. Other casualty lines, including commercial auto, general liability, and umbrella/excess liability, maintain sufficient capacity and stabilized rate trends.

Legislative developments such as tort reform in states like Georgia and Texas may reduce litigation costs and potentially improve insurance affordability and coverage, especially for high-risk industries like trucking. Overall, while catastrophe loss trends challenge underwriting and pricing, well-capitalized insurers and competitive market dynamics offer opportunities for insureds, particularly in areas with favorable risk profiles.