P&C market holds steady
Market conditions for commercial insurance buyers largely remain steady and predictable, with insurers navigating a familiar, turbulent macro environment. The second quarter delivered one of the strongest performances in recent memory, with underwriting profitability, investment returns, and premium growth all contributing to robust earnings. Competition is intensifying in the property market, and favorable terms remain available to most buyers of workers’ compensation, D&O, and cyber insurance.
That said, early warning signs of potential tightening are emerging in both the D&O and cyber markets. And third-party liability remains the big story, driven by the effects of social inflation and escalating loss trends.
Strong first-half results coupled with warning signs
In the first half of 2025, leading P&C insurers continued to demonstrate strength and discipline, and they reported growth across most key metrics. (See Figure 11.) Premiums and investment income trended up, while combined ratios remained largely stable. ROE slipped modestly, in part due to slowing premium growth and a narrowing of the gap between new money and portfolio yields.
Most carriers reported excess capital and low debt-to-capital ratios. This has given them flexibility in a moderating growth environment. While convective storm activity was elevated in the second quarter and insurers face lingering impacts from January’s California wildfires, they benefited from sustained rate adequacy and improved loss trends, particularly in personal auto and homeowners.
The U.S. P&C industry’s combined ratio improved from 97.6% in the first half of 2024 to 96.4% in the first half of 2025, according to Verisk and the American Property Casualty Insurance Association (APCIA). From the first six months of 2024 to the same period in 2025, Verisk and APCIA also reported that:
- Net written premiums increased from $463.8 billion to $472.5 billion.
- Net underwriting gains grew from $3.8 billion to $11.5 billion.
- Pretax operating income rose from $44.3 billion to $52.5 billion.
Despite these positive results, persistent doubt is weighing on the marketplace. For many insurers, we are in a new normal characterized by ambiguity.
“We see headwinds to premium growth building, which may be compounded if exposure growth slows,” the Swiss Re Institute said in its most recent U.S. property and casualty outlook, titled “Sunny skies, but pack an umbrella.”
For 2025 and 2026, Swiss Re forecasts slowing growth in direct premiums written, underwriting results, and returns on equity, although investment yields are expected to modestly improve. (See Figure 12.) The industry combined ratio is also projected to deteriorate, from 97.2% in 2024 to 98.5% in 2025 and 99.0% in 2026, Swiss Re said.
Favorable reinsurance conditions
The property reinsurance market continues to soften. Capacity remains robust, and though reinsurers are competing for opportunities, they are not yet trying to “buy” deals by significantly undercutting the market on pricing. Attachment points, terms and conditions, and limits have remained stable since corrections in 2022, 2023, and the first half of 2024. Barring a major catastrophe or other event, however, pricing is expected to continue to trend downward through the end of 2025.
Despite this, the market is not without its challenges. Property reinsurers continue to scrutinize so-called “secondary” perils, while wildfire and flood risks remain difficult to price and underwrite. Insurers also remain uncertain about the impact of tariffs and inflation on losses; the market has not developed a universal view of how these trends will affect conditions.
Meanwhile, the reinsurance landscape for liability has remained largely consistent, continuing to support a marketplace in which rates are escalating, but in a relatively predictable manner. Overall, reinsurers appear reasonably content with the steps cedants have taken to strengthen their liability books, such as trimming limits and pushing for rate increases, and are holding their positions for now. Concerns about loss severity and the impact of social inflation are top of mind, but offset to some degree by favorable underlying rates.
Treaty pricing is generally steady, supported by ample capacity and optimism among some reinsurers. However, profitability in casualty reinsurance remains uncertain; one reinsurer with a casualty-heavy portfolio recently exited the space, while others are scaling back due to disappointing calendar year outcomes.
Conversely, some reinsurers — particularly newer players — view the current environment as a strategic opening. We also anticipate a slight pivot toward additional capital deployment in casualty due to budget pressures associated with declining property rates.
In cyber, reinsurers remain bullish, showing greater appetite to deploy capacity across existing and new portfolios on a quota share or excess of loss basis. Since the fourth quarter of 2024, several new reinsurers have entered the space, adding capacity and driving improved ceding commissions and loss ratio caps, risk-adjusted rate decreases, and more consistent terms. Cedants have shifted their focus to tail risk as they seek to optimize their portfolios through low-attaching event covers, time-bound aggregate protections, and other structures. Traditional proportional reinsurers have begun to deploy capacity in the nonproportional space to meet rising demand for excess of loss products.
Tempering expectations
Despite rate relief across many primary lines, buyers should not expect a return to the soft market conditions that existed prior to 2019. Insurers are only allocating capital where it enhances returns, prioritizing profitability above market share. This marks a clear pivot from volume-driven strategies to more precision underwriting — a shift echoed in remarks by Chubb CEO Evan Greenberg, who emphasized the importance of underwriting integrity in large property portfolios during the insurer’s second-quarter earnings call.
In addition to maintaining underwriting discipline, insurers are prioritizing:
01
The return of capital to shareholders. Multiple carriers reported returning at least $1 billion to shareholders in the second quarter via share repurchases and dividends, signaling confidence in future earnings.
02
Strategic merger and acquisition opportunities. Insurers will consider deal opportunities where they make sense and promise strong returns. But they are not pursuing deals simply to achieve scale.
03
Optimization of investment portfolios in anticipation of lower interest rates. Carriers acknowledged that declining interest rates could slow investment income, but most believe the impact will be gradual, and some see opportunities to reinvest in bonds and other long-dated assets.
04
Diversification of revenue sources. Carriers with multiple revenue streams — writing several lines, including property, casualty, management liability, personal lines, and reinsurance, and/or risks in several geographies — will be more resilient and better poised to ride out market fluctuations than those with more limited earning opportunities, such as specialty insurers.
To be sure, many insurance buyers are securing rate reductions, but we are not seeing widespread softening. Instead, insurers are recalibrating, almost surgically, in response to improved risk clarity, competitive dynamics, and more refined underwriting segmentation. Rate relief should not be seen as a sign of weaker underwriting standards — instead, it reflects insurers’ growing confidence in underlying risk models and portfolio performance.
Insurers are pricing risk more intelligently than ever. Enhanced data, predictive analytics, and portfolio-level insights are allowing insurers to fine-tune terms, adjust attachment points, and redesign programs to preserve margins while remaining competitive.
The rise of MGAs
Premium generated through managing general agents (MGAs) grew nearly 15% to $89.9 billion in 2024, according to AM Best. This marked the fourth consecutive year of double-digit premium growth, underscoring the strategic value MGAs offer in navigating today's complex insurance market dynamics.
Functioning as specialized intermediaries with delegated underwriting authority, MGAs enable carriers to penetrate niche markets and scale distribution efficiently without incurring the overhead of building internal capabilities. MGAs’ agility and domain expertise are particularly useful in specialty and excess and surplus (E&S) lines, where tailored solutions are essential to address emerging and nonstandard risks.
The industry’s pivot toward nonexclusive MGA relationships — which now constitute 57% of MGA premium volume, according to AM Best — signals a broader shift toward diversification and operational flexibility. Carriers are increasingly leveraging MGAs to enhance underwriting precision, respond to cyclical market shifts, and accelerate program innovation. Technology and data analytics continue to amplify MGAs’ strategic relevance, enabling more granular risk selection and adaptive pricing strategies.
As insurers contend with macroeconomic headwinds, rising loss costs, and heightened underwriting scrutiny, MGAs remain a vital conduit for portfolio optimization and market expansion. Their continued evolution will be instrumental in shaping the next phase of growth and resilience across the P&C sector.
AI’s growing insurance industry influence
Across the insurance industry, innovation has become a strategic imperative. From global carriers to regional MGAs, advanced AI, data, and technology are transforming underwriting, pricing, and portfolio management. Specific carrier priorities include:
- Real-time risk intelligence. Insurers are integrating satellite imagery, Internet of Things sensor data, and AI-powered analytics to assess exposures with unprecedented granularity.
- Enhanced calibration. Access to richer datasets — claims histories, telematics, and behavioral data — is enabling tighter loss picks and more confident pricing decisions. AI is also streamlining data management and analysis, reducing manual effort and improving accuracy.
- Collaborative platforms. Insurers, brokers, and other players are investing in shared data ecosystems and loss control platforms, fostering transparency and faster decision-making.
- Product innovation. Parametric solutions, usage-based coverage, and micropolicies are scaling rapidly, driven by demand for flexibility, responsiveness, and customized solutions.
The net result is a more adaptive, data-driven market in which underwriting decisions are made with greater speed, intelligence, and precision.
At the same time, the insurance industry continues to experience a widening talent gap, especially in underwriting and claims. Senior technical expertise is in short supply, leading to bottlenecks in placement and claims resolution. While AI is helping streamline low-complexity tasks, human capital remains vital for navigating nuanced risk decisions — especially in large, layered programs.
Beyond its implications for insurers’ operations, AI is also emerging as a new risk category. Businesses are increasingly seeking coverage for AI-driven errors, bias, and autonomous system failures — issues that are not yet well addressed in current professional liability or cyber policy wordings. Carriers are cautiously exploring responses amid significant regulatory uncertainty.
What’s keeping insurers up at night?
Climate change remains a chief area of concern for insurers. Natural catastrophes — including hurricanes, earthquakes, wildfires, and convective storms — continue to confound the market and are a prime reason why combined ratios are increasing.
In the first half of 2025, global insured catastrophe losses totaled $80 billion, according to the Swiss Re Institute, driven by the California wildfires and thunderstorms across the U.S. (See Figure 13.) The only year in which first-half losses were greater was 2011, when major earthquakes in Tohoku, Japan, and Christchurch, New Zealand, contributed to $125 billion in losses.
“Wildfire risk is evolving amid settlement trends and lengthening of fire seasons, with changing climates compounding the loss threat that fires present,” Swiss Re said. “This adds volatility to global natural catastrophe losses, making the latter more difficult to predict.”
Notably, the bulk of first-half losses this year occurred during the first quarter. The second quarter was uneventful, providing at least a brief respite for insurers and reinsurers.
Although models are updated after every event, the frequency and severity of extreme weather events are outpacing historical assumptions. Insurers are now grappling with how to price and reserve for risks that are becoming less predictable.
The recent Texas floods have also reignited concerns around contingency planning and the potential consequences of funding cuts to the Federal Emergency Management Agency (FEMA) and related agencies, such as the National Oceanic and Atmospheric Administration (NOAA). These concerns were underscored by FEMA employees themselves in an August letter to Congress. With several weeks remaining in the 2025 Atlantic hurricane season, this is particularly troubling.
Other factors are contributing to an unsettled insurance landscape. These include:
Macroeconomic volatility.
Persistent inflationary pressures, currency fluctuations, sovereign debt concerns, and shifting interest rate policies continue to complicate long-term planning and capital allocation strategies.
The political environment.
A burgeoning trade war and escalating regional conflicts are heightening concerns about the potential for loss of life and property as well as disruptions to global supply chains. Insurers are also monitoring risks tied to political polarization, sanctions, and potential state-sponsored cyberattacks. Domestically, a rapidly changing regulatory landscape — one that increasingly diverges from global frameworks — is creating myriad compliance challenges, including regarding AI governance, cybersecurity and data privacy, and environmental liability.
The evolution of cyber risks.
The threat landscape continues to shift rapidly, with ransomware, supply chain attacks, and AI-driven exploits becoming more sophisticated. Coverage adequacy, aggregation risk, and silent cyber exposures remain top of mind for carriers.
Ultimately, the insurance market remains fragile. Insurers are more sensitive than ever to adverse developments and acutely aware that — under the right conditions — the market could quickly pivot in an unfavorable direction. This heightened vigilance is informing insurers’ risk appetites, pricing discipline, and portfolio strategies.
In this environment, risk quality translates to negotiating power. Buyers with strong controls, better data, and favorable loss histories are seeing tangible benefits in pricing and terms. As carriers continue to invest in modeling and analytics, proactive risk management becomes even more essential.
