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.
Lockton's July 2026 Market Update, published this week, attributes the buyer-friendly conditions to strong insurer profitability, abundant capital, and growing carrier competition. The report cautions that macroeconomic pressure, geopolitical instability, and emerging AI exposures could erode those 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. The report signals that further reductions are running out of room as catastrophe frequency and severity keep 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. The market is competitive, with rates broadly flat or decreasing in many jurisdictions. Rising claims severity, though, is beginning to press on margins 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.
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 different pressure: AI-driven fraud is expanding the exposure base faster than policy language has kept pace.
Fiduciary liability remains well-capitalized 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.
One of the report's central themes is AI as a pervasive, multi-line exposure that extends well beyond the technology sector. Lockton identifies AI-related liability, fraud, bias, and governance as areas where underwriting scrutiny is rising and coverage terms are being reevaluated across multiple lines.
That shift is already visible in policy language. The Insurance Services Office introduced new AI-related exclusions at the start of 2026. Several large underwriters have since added similar provisions to corporate policies over concern about systemic losses from AI failures and deepfake-enabled fraud.
Greg Spore, Lockton's director of market intelligence, said early engagement, strong data, and disciplined program design carry greater weight now than in years past. "In today's environment, they can make the difference between simply securing coverage and building a resilient risk management strategy," Spore said.
The report advises buyers to pursue scenario-based program analysis rather than siloed placements. Multiyear arrangements can lock in favorable terms, and investment in internal risk controls is expected to improve underwriting outcomes.
