The Baldwin Group’s Market Pulse report for Q1 2025 highlights mounting challenges in the US commercial insurance market. Most coverage lines saw premium increases, driven by early-year natural disasters, legal cost escalation, and the resurgence of tariffs on imported goods.
After signs of stabilization in 2024, the commercial property market experienced renewed pressure following major wildfire events. In January, the Palisades and Eaton Fires in Los Angeles County destroyed more than 16,000 structures, quickly depleting reinsurers’ catastrophe budgets for the year. Though 2024 reinsurance renewals were broadly favorable, the early surge in catastrophic events triggered a reversal in pricing trends.
Other significant weather events—including blizzards across the Central Plains, spring wildfires, and flooding in the Appalachians—further affected regional underwriting. The report also warns that rising material costs from newly imposed tariffs are likely to increase rebuilding expenses, potentially creating coverage gaps if insureds fail to adjust policy values.
Legal trends remain a defining challenge in the casualty market. The report describes “legal system abuse” as a primary concern, citing the influence of nuclear verdicts, social inflation, and third-party litigation funding. These forces are driving up claims severity and resulting in higher premiums.
General liability insurance recorded a 5.8% pricing increase, particularly in high-risk sectors such as healthcare, construction, and education. Insurers are adopting more cautious underwriting strategies and closely monitoring jurisdictions known for litigation volatility.
The commercial auto market remains hardened, with a 10% rate increase in Q1. The sector continues to face driver shortages, escalating medical and repair costs, and an unfavorable litigation environment. According to the report, insurers are maintaining strict underwriting guidelines and expect prolonged pricing pressure throughout 2025.
New tariffs are also expected to impact this sector significantly, as many vehicle parts are sourced from North American trade partners. This could add further strain to an already struggling market.
Umbrella liability experienced a 10.3% pricing increase in the first quarter, reflecting the compounded impact of losses in general liability and auto. While overall market capacity remains adequate, insurers are becoming increasingly selective. Higher hazard classes such as transportation and real estate face greater scrutiny and reduced limit offerings.
In contrast to other commercial lines, workers’ compensation continued to exhibit soft market conditions, with rates declining slightly by 0.5%. The report attributes this to strong market competition and ample capacity. However, rising medical costs and evolving presumption laws could pose headwinds in the months ahead.
With the 2025 storm season approaching and midyear reinsurance renewals on the horizon, the commercial insurance market remains in flux. The Baldwin Group anticipates continued moderate firming in select sectors, emphasizing the need for careful risk evaluation and proactive policy adjustments.
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