Liability is the fault line running through the US commercial insurance market in mid-2026. Most lines have softened, but social inflation is keeping casualty conditions hard even as buyers gain ground elsewhere - and cutting across the entire line-by-line picture is an AI exposure that does not respect class boundaries. Lockton's July 2026 Market Update attributes buyer-friendly conditions broadly to strong insurer profitability, abundant capital and growing carrier competition, but identifies AI-related liability, fraud, bias and governance as areas where underwriting scrutiny is rising and coverage terms are being reevaluated across multiple lines simultaneously. The Insurance Services Office introduced new AI-related exclusions at the start of 2026, and several large underwriters have since added similar provisions to corporate policies over concern about systemic losses from AI failures and deepfake-enabled fraud. The report cautions that macroeconomic pressure, geopolitical instability and AI exposures could erode buyer-friendly conditions faster than many buyers anticipate.
"Conditions have softened across many lines creating one of the most buyer-friendly markets in years," said Vince Gaffigan, Lockton's US market strategy and engagement group leader. "But buyers can't afford to be passive."
Property insurance remains competitive, with pricing declining across most segments, but the report signals that further reductions are running out of room as catastrophe frequency and severity maintain upward pressure on underwriting costs. Buyers with strong valuations and clean loss histories are still securing the best terms, but that selectivity is becoming more pronounced.
Workers' compensation is in a similarly favorable position, with rates broadly flat or decreasing in many jurisdictions. Rising claims severity is beginning to press on margins, though, and could narrow rate adequacy over the coming year.
Liability stands apart from the broader softening trend. Social inflation is pushing loss severity across auto, general liability, umbrella and excess lines, and underwriters have responded with tighter terms. Annual liability claim costs rose approximately 7% in 2024 - the highest annual increase in two decades, according to the Swiss Re Institute - giving the casualty hardening its specific quantified foundation. The fault line between softening property and workers' compensation conditions and hardening liability is the defining feature of the current market for buyers with multi-line programmes.
D&O pricing for public companies is broadly flat, but insurers are applying closer scrutiny to AI-related governance risks, geopolitical exposure and financial performance. Private company and nonprofit D&O is stable, with underwriters focused on financial health and claims history. Employment practices liability is stable overall, though claims activity and regulatory scrutiny are rising. Fidelity and crime coverages face a specific pressure: AI-driven fraud is expanding the exposure base faster than policy language has kept pace. Fiduciary liability remains well-capitalised despite ongoing litigation pressure.
The cyber market is buyer-friendly but shows signs of directional change. Insurers are applying greater underwriting discipline, and buyers who have not locked in favorable terms may face tightening conditions before year-end.
Greg Spore, Lockton's director of market intelligence, said early engagement, strong data and disciplined programme design now carry greater weight in securing coverage and building a resilient risk management strategy than in years past. The report advises buyers to pursue scenario-based programme analysis rather than siloed placements, with multiyear arrangements able to lock in favorable terms and investment in internal risk controls expected to improve underwriting outcomes - particularly as AI exclusions widen across corporate policy wordings and the window for locking in pre-tightening terms narrows.
