Lockton Analyzes 2025 Insurance Market Shifts, Rates, and Reinsurance

Lockton's June 2025 Market Update, titled More Questions Than Answers, provides a comprehensive midyear review of commercial insurance conditions, analyzing pricing trends, reinsurance activity, natural catastrophe losses, and global risk factors. According to the report, the industry continues to navigate economic uncertainty, evolving regulatory landscapes, and heightened geopolitical tensions.

Insurers entered 2025 with strong financial footing. Lockton notes that underwriting discipline and investment gains helped insurers maintain profitability. However, macroeconomic concerns—including a contraction in US gross domestic product in the first quarter of 2025 and record natural catastrophe losses—have tempered the outlook for the remainder of the year.

Reinsurance Market Conditions

Lockton reports that reinsurance market conditions remained favorable through the April 1, 2025, treaty renewals. Property reinsurers are demonstrating flexibility on pricing and terms, supported by solid capital positions and underwriting profitability in 2023 and 2024. January's California wildfires primarily affected personal lines and retrocession layers, with limited impact on commercial property programs.

The liability reinsurance market is also described as broadly stable. According to the report, reinsurers are generally satisfied with recent actions by cedants to manage liability portfolios, including reducing limits. Treaty rates are flat, capacity remains abundant, and no major disruptions are expected absent significant events.

Parametric Insurance and Strategic Buying Considerations

Lockton notes that some insurance buyers are shifting back to traditional property coverage after previously adopting parametric insurance during the hard market. Others continue to use parametric products due to their streamlined claims processes and flexibility. "Other buyers that chose parametric coverage in recent years because of its speedy claims resolutions and flexible terms and conditions continue to purchase such policies; in some cases, they are increasing limits," the report states.

Lockton outlines several strategies for navigating the current softening market.

• Reevaluate retentions, limits, and attachment points
• Broaden terms and remove exclusions
• Pursue multiyear rate guarantees
• Use modeling and insights driven by artificial intelligence
• Conduct scenario testing to enhance resilience
• Collaborate with brokers to assess whether global programs or locally admitted coverage are appropriate

These recommendations are presented as ways for buyers to position themselves more effectively ahead of future market cycles.

Coverage Line Insights

Property Insurance

Lockton reports that property insurance rates are declining for the first time in years. Median rates fell 1.3 percent in the first quarter of 2025, and buyers are seeing expanded capacity and improved terms. Noncatastrophe-exposed programs are seeing rate changes from −15 percent to flat, while catastrophe-exposed accounts are experiencing reductions from −20 percent to −5 percent. Insurers are competing aggressively for middle-market business. They remain cautious, however, about future catastrophe events—especially given the $38 billion in wildfire losses reported in the first quarter.

Cyber Insurance

Conditions in the cyber insurance market remain competitive. According to Lockton, insurers are actively seeking to write new and renewal business. Modest rate increases are occurring in some segments, driven by a more challenging claims environment, but capacity and appetite remain strong.

Directors and Officers (D&O) Liability

D&O rates continued to decline in the first quarter, but Lockton reports that insurers believe the market may be reaching its floor. As pricing stabilizes, the focus has shifted to maintaining underwriting discipline and managing loss trends. Buyers may encounter more scrutiny during renewals, but competition among insurance companies remains active.

Liability Insurance

Lockton describes the liability market as "challenged." Social inflation and increasing loss severity continue to drive rate pressure. The report notes that broad tort reform efforts have not materialized. In 2024, there were 135 "nuclear" verdicts—awards of $10 million or more—up from 90 in 2023. Of these, 49 exceeded $100 million. Legislative actions in Georgia (SB 68 and SB 69) are highlighted as efforts to address litigation funding and limit noneconomic damage evidence.

Workers Compensation

Workers compensation remains one of the most profitable lines for insurers. Lockton cites the National Council on Compensation Insurance, which reported a 2024 combined ratio of 86 percent, marking the tenth consecutive year of underwriting profitability. In the first quarter of 2025, median rates for guaranteed cost and loss-sensitive programs declined by 2.9 percent. The report emphasizes that the line remains competitive, with favorable conditions for buyers.

Natural Catastrophes

Lockton highlights a significant increase in insured losses from natural catastrophes. US property and casualty insurers reported $50 billion in insured losses in the first quarter of 2025—$38 billion of which was attributed to January wildfires in Southern California. Per the report, according to Swiss Re, global insured catastrophe losses totaled $137.4 billion in 2024 and are projected to reach $145 billion in 2025, making this year potentially the fourth costliest on record.

The report states that secondary perils—including convective storms and flooding—accounted for nearly 60 percent of all catastrophe losses in 2024. Lockton notes that catastrophe-related volatility is expected to continue, and insurers remain cautious heading into hurricane season. The National Oceanic and Atmospheric Administration predicts a 60 percent chance of above-normal Atlantic hurricane activity in 2025.

Geopolitical Risk and Global Program Structuring

Lockton identifies several global risk trends that are affecting multinational insurance programs as follows.

• US-China relations. Strategic competition continues across trade, technology, and regulation. Developments in data privacy, export controls, and environmental compliance are reshaping risk exposures and coverage requirements.
• Hyperlocalization and regulatory divergence. Companies are reassessing global insurance structures due to regulatory shifts in China, Latin America, and the Middle East. Many are evaluating the use of standalone, locally admitted policies that align more closely with national requirements.
• Emerging market volatility. Political instability and currency risk in Latin America and Africa are cited as growing concerns. Lockton notes that volatile exchange rates can erode premium values and inflate claims costs in foreign-denominated policies, necessitating well-structured currency conversion clauses.

The report also discusses the implications of the ongoing conflict in the Middle East, advising businesses to review coverages for property, marine cargo, business travel accidents, and political violence. War exclusions and evacuation clauses are flagged as critical elements for review.