The commercial insurance market in the United States is facing significant challenges, according to the Baldwin Group’s Market Pulse report for the first quarter of 2025. A combination of natural disasters, rising legal costs, and new tariffs on imports has led to increased premiums across most coverage lines.
This year started with devastating wildfires in Los Angeles County, where the Palisades and Eaton Fires destroyed over 16,000 structures. These events quickly drained reinsurers’ budgets for catastrophes, reversing the positive pricing trends seen in 2024. Other severe weather incidents, including blizzards and flooding, have added further strain, affecting how insurers assess risks in various regions.
Legal issues are also a major concern for the casualty market. The report highlights "legal system abuse," which includes large jury awards and the influence of third-party funding for lawsuits. These factors have driven up the severity of claims, leading to higher premiums. For instance, general liability insurance saw a 5.8% increase, especially in high-risk industries like healthcare and construction.
The commercial auto market is particularly hard-hit, experiencing a 10% rate increase in the first quarter. Challenges such as driver shortages, rising medical costs, and a tough legal environment have contributed to this situation. Insurers are tightening their underwriting standards and expect pricing pressures to continue throughout the year.
In contrast, workers’ compensation insurance has shown a slight decline of 0.5% in rates, thanks to strong competition and sufficient market capacity. However, rising medical costs could change this trend in the future.
Looking ahead, the Baldwin Group anticipates that the commercial insurance market will remain unstable as the storm season approaches. Insurers will need to carefully evaluate risks and adjust policies proactively to keep up with the evolving landscape.