Persistent headwinds plague liability market
Liability insurance rates continue to climb for most buyers. In the second quarter, rates for primary general liability rose 3.9% and auto liability rates rose 8.8%, on average, according to data from the Council of Insurance Agents & Brokers.2 (See Figure 16.)
Umbrella and excess liability, however, remain more volatile for buyers, depending on class of business, fleet size, and loss history. Median lead umbrella price per million rose 9.9% in the second quarter, according to Lockton data, while median excess casualty price per million rose 10.3%. (See Figure 17.)
Insurers remain selective in how they deploy capacity, carefully managing attachment points, limits, and tower positioning. This posture is particularly challenging for midsize companies, which often lack the financial flexibility to absorb large deductibles but still need meaningful limits. These buyers often face some of the steepest rate increases in the market.
Transportation, healthcare, construction, consumer products, real estate, and hospitality industry organizations continue to face headwinds in securing favorable terms. These sectors are frequently associated with complex litigation, contributing to high claim frequency and growing severity.
Liability underwriters continue to focus their attention on several key areas. In auto liability, large fleet operators face persistent scrutiny around safety programs, telematics, driver experience and training protocols, and historical loss performance. Meanwhile, as product liability claim frequency grows, underwriters are paying close attention to product design and testing, recall history, contractual indemnities, and risk transfer mechanisms.
Across all lines, jurisdictional risks are a growing concern. Insurers are closely monitoring litigation trends in states with reputations for being friendly to plaintiffs. Risks operating in California, New York, and Illinois, are under close scrutiny due to the prevalence of aggressive and politically networked plaintiffs’ bars and large verdicts. Other jurisdictions flagged by the American Tort Reform Foundation as “judicial hellholes” include Missouri and Pennsylvania. In these jurisdictions, juries are often friendly to plaintiffs and "junk science" is often admissible; this has contributed to a rise in so-called "nuclear" verdicts of $10 million or more.
Notably, Florida has seen a turnaround since enacting tort reforms in early 2023. In 2022, nuclear verdicts in Florida awarded plaintiffs $32.7 billion, second only to Texas, according to Marathon Strategies. In 2024, that figure dropped to $538 million, the 10th-most among all states.
Insurers are increasingly cutting ties with businesses seen as supporting the litigation funding industry, viewing such relationships as contributing to the escalation of claim severity. This scrutiny extends beyond underwriting to broader commercial interactions, with some carriers directly asking whether brokers or insureds engage with, place business for, or otherwise support third-party litigation funders. Even indirect affiliations — such as referrals, partnerships, or passive investments — can prompt adverse decisions, as insurers seek to distance themselves from entities perceived to be amplifying systemic risk.
Whether this strategy will succeed remains uncertain, given competing market incentives, the scale and fragmentation of the P&C marketplace, and the absence of any dominant carrier capable of enforcing uniform standards.
Insurers are also scrutinizing terms and conditions, with a growing emphasis on introducing exclusions for emerging and complex risks. These exclusions reflect heightened concerns around regulatory ambiguity, litigation volatility, and long-tail exposures.
Key areas of focus include:
AI.
Insurers are citing concerns over algorithmic bias, autonomous decision-making, and a rapidly evolving regulatory environment. Insurers are especially concerned about AI’s impact on the technology, financial services, and healthcare sectors.
Per- and polyfluoroalkyl substances (PFAS).
PFAS exclusions are becoming standard across liability policies as litigation accelerates. The widespread use of these “forever chemicals” in manufacturing, packaging, and consumer goods has triggered a wave of lawsuits, with insurers increasingly unwilling to underwrite the associated environmental and bodily injury risks without significant limitations.
Microplastics.
While exclusions are not yet widespread, microplastics are gaining attention as a potential liability exposure. Environmental and health concerns are prompting some carriers to introduce exclusions or sublimits.
Nanotechnology.
Exclusions are expanding for insureds in the life sciences, advanced manufacturing, and semiconductor sectors, driven by uncertainty around long-term health effects and the lack of established regulatory frameworks. Insurers are wary of risks tied to materials and technologies that may have latent toxicity or bioaccumulation effects.
Climate-related liabilities.
Some insurers are introducing exclusions or sublimits for liabilities tied to environmental exposures, climate-related disclosures, and risks related to environmental, social, and governance investing frameworks.
As traditional insurers adopt a more conservative stance and tighten underwriting across several classes, E&S lines and MGAs are playing a growing role in supporting capacity needs, particularly for difficult-to-place and distressed risks. New entrants in these channels are targeting specialized product lines and niche segments, offering greater innovation, flexibility, and responsiveness. Their expansion reflects a broader market shift toward tailored, nonadmitted solutions that can accommodate complex exposures and evolving risk profiles. These players can often offer more innovation in coverage structure, limit deployment, and risk-sharing mechanisms, especially for insurance buyers in industries facing heightened litigation or regulatory scrutiny.
While these solutions offer a certain level of agility and capacity, questions remain about their long-term sustainability during volatile market cycles. The industry is already facing significant talent shortages, and compared with traditional markets, MGAs may lack claim infrastructures and/or technical underwriting talent, which can undermine consistency and trust. Given this, buyers must weigh potential trade-offs and may be better served by viewing MGAs as tactical “capacity plays” rather than strategic partners.
Alternative risk solutions continue to gain meaningful traction as policyholders seek greater control over their risk financing strategies. These mechanisms are increasingly used to bridge gaps in attachment points, manage volatility in excess layers, and tailor coverage to emerging exposures.
MGAs, in particular, are partnering with reinsurers and alternative capital providers to develop innovative product designs and customized risk-sharing structures. Such collaboration enables a more flexible approach toward complex risks and helps buyers find and access capacity that may be restricted in more traditional markets.
The continued increase in the deployment of designated underwriting facilities is further fueling the trend. These facilities not only enhance underwriting efficiency and speed to market but also act as a scalable revenue engine for brokers and wholesalers. By aggregating specialized risks and streamlining distribution, facilities enable more targeted product development and capital deployment. They also offer reinsurers and alternative capital providers a more efficient path to accessing diversified portfolios.
In the current market, differentiation is critical. Insureds that can demonstrate robust risk management practices and favorable loss histories are better positioned to attract underwriting attention and secure more competitive terms from liability carriers.
1Note: Rate ranges presented here reflect expected renewal outcomes — as of the Lockton Market Update publication date — over the next quarter for most insurance buyers. These should not be taken as a guarantee of any specific results during renewal negotiations. Depending on risk profiles, loss histories, and other factors, individual buyers may renew their programs outside these ranges.
2Charts in this report using Lockton P&C Edge Benchmarking data show median rate changes year over year. Median figures, however, are not available for Figure 16, which uses data from CIAB.
