Hylant's Q1 2025 Report Reveals Insurance Market Forecasts

Hylant's report, Market Update: Commercial Insurance, First Quarter 2025, provides a comprehensive overview of trends, challenges, and rate expectations across key commercial insurance lines entering 2025.

According to Hylant, the automobile insurance market continues to harden. Light- to medium-hazard fleets with favorable loss histories may see 5 to 10 percent rate increases, while high-hazard fleets or those with poor histories may experience up to 25 percent increases. The plaintiff's bar remains active in auto litigation, significantly contributing to rising claim costs. Increased vehicle technology and inflation are also pushing up repair costs. The industry's auto combined ratio has been above 100 percent for more than a decade, and insurers are raising deductibles and attachment points for third-party shipping exposures, regardless of individual account performance.

Per the report, general liability insurance shows signs of moderation, with renewal rate increases projected between 2 and 8 percent. Although insurers have seen improved performance in recent years, nuclear verdicts—defined as judgments exceeding $10 million—remain a concern, accounting for over 37 percent of such cases. Perfluoroalkyl and polyfluoroalkyl substances (PFAS) exposures are under close scrutiny, with many underwriters mandating questionnaires and applying exclusions. Difficult industry classes such as real estate, firearms, and pharmaceuticals are likely to experience higher-than-average increases.

The international casualty market remains stable and competitive, according to Hylant. For accounts with strong loss histories, rates are expected to remain flat or decrease slightly, ranging from a 5 percent decrease to a 5 percent increase. Regulatory reforms, inflation, and geopolitical instability—especially in regions like Eastern Europe and Asia—are influencing underwriting practices. Environmental, social, and governance (ESG) rules are tightening in Europe, and insurers are adopting artificial intelligence (AI) for predictive modeling and fraud detection.

Umbrella and excess casualty coverage continues to harden, with renewal rates projected to increase between 5 and more than 20 percent, per Hylant. Large umbrella towers require detailed, high-quality submissions. Insurer capacity for excess layers is decreasing, with some reducing limits from $15 million to $10 million. Claim severity has increased significantly; average umbrella claim costs have tripled over the past decade. Third-party litigation funding is contributing to the rise in large settlements, with investment in this area expected to reach $31 billion by 2028.

Hylant reported that workers compensation insurance remains the most profitable property and casualty line, with a soft market and expected renewal rates between a 5 percent decrease and a 2 percent increase. The National Council on Compensation Insurance's 2024 State of the Line Guide reported a combined ratio of 86 percent for 2023. While claim severity is gradually increasing due to medical inflation and demographic factors, insurers continue to manage costs effectively. Legal developments around marijuana and "extraordinary work-related stress" may affect future claim trends.

Cyber insurance conditions are relatively stable, according to the report, with flat to 10 percent increases expected depending on an insured's controls and risk posture. Ransomware remains a key threat, especially with the use of AI tools such as ChatGPT to launch more sophisticated attacks. Despite increased awareness, human error continues to cause 80 percent of claims. Digital supply chain risks and contingent business interruption coverage are receiving more attention from underwriters.

Environmental insurance is facing flat rate expectations, but market behavior is becoming more selective, per Hylant. Insurers are increasingly declining to write risks involving certain contaminants like ethylene oxide and nanomaterials. There is a growing trend toward mandatory pollution liability coverage in contracts, and insurers are closely reviewing cleanup triggers in policies, especially around voluntary site investigations. Older underground storage tanks are becoming harder to insure and may see rising premiums and retentions.

Crime insurance remains stable with abundant market capacity, according to Hylant. Social engineering losses continue to concern underwriters, with AI-driven schemes increasingly bypassing traditional controls. While base coverage may be sublimited, excess coverage for social engineering is widely available. Insurers are bundling crime policies with broader executive risk offerings to enhance retention.

Directors and officers insurance is soft, with abundant capacity and expected renewal rates ranging from a 10 percent decrease to flat. Hylant noted that 222 securities class actions were filed in 2024, many related to cryptocurrency, AI, and data breaches. Private companies are receiving broader coverage grants, including for antitrust and entity investigations. Underwriting remains cautious for distressed companies or industries with heightened regulatory exposure.

Employment practices liability insurance maintains stable market conditions, per the report. Renewal rate changes range from a 10 percent decrease to a 5 percent increase. Discrimination and wrongful termination claims are still leading causes of loss. Legal and regulatory shifts—including anticipated changes under a potential new administration—could affect underwriting. Companies in high-risk jurisdictions or industries like health care and retail may face higher premiums and retentions.

Fiduciary liability coverage shows expected rate changes from a 5 percent decrease to a 5 percent increase, with stable conditions and growing competition, according to Hylant. Underwriters are focusing on litigation related to excessive fees and fiduciary oversight of third-party vendors. Lawsuits over pharmacy benefit management costs are a growing trend. Impact investing remains a concern for fiduciaries due to its potential to conflict with the Employee Retirement Income Security Act's financial responsibility standards.

Mergers and acquisitions and transaction solutions are showing moderate premium increases, with average representation and warranties insurance (RWI) rates between 2.3 and 2.7 percent, depending on the deal. Per Hylant, retention levels have stabilized, and terms remain favorable due to high competition. Insurers are adapting to public-style, no-seller indemnity structures. Latin America is emerging as a growth region for RWI placements, with rising interest in markets like Brazil and Mexico.

Marine insurance is largely stable, with expected renewal increases ranging from flat to 10 percent. According to Hylant, a potentially crippling port strike was averted in early 2025. Insurers are restructuring liability towers due to commercial auto exposures, and retention issues in the maritime workforce are drawing increased attention. Underwriters are also responding to growing claims complexity related to geopolitical instability and global supply chain disruption.

Finally, Hylant noted that the property insurance market is stabilizing, with expected renewal rates ranging from a 10 percent decrease to flat. Rate moderation is possible for accounts with strong loss histories, favorable occupancies, and well-managed risks. Wildfires in California may affect global capacity. Deductibles for water damage, wind, and hail are trending higher, especially in vulnerable regions. Underwriters continue to emphasize accurate valuations and risk improvement initiatives.