Insurance Marketplace Realities 2025 – Middle market

Rate predictions: Middle market

	Trend	Range
Favorable risks
Property		+2% to +10%
General liability		Flat to +5%
Automobile		+5% to +10%
Workers compensation		-5% to flat
Umbrella		Flat to +10%
Excess		Flat to +10%
Challenging risks
Property		+10% to +20%
General liability		+10% to +15%
Auto		+20% to +30%
Workers compensation		+5% to +10%
Umbrella		+10% to +15%
Excess		+10% to +15%

Marketplace overview

• When the property market was most challenged, markets reduced rates on the casualty lines to offset property increases. This trend has now put pressure on general liability pricing as losses continue to develop.
• While middle market is an established segment in the broker and carrier community, additional markets continue to enter the space. Many of these carriers are aligning loss-sensitive program solutions and expertise to their middle market teams to offer alternative program structures to this client base.
• Amid these new entrants, the market has also seen major disruption with some large carriers pulling out of middle market or primary casualty entirely. Others are undergoing a casualty re-underwriting strategy with General liability-focused accounts facing structural changes or non-renewals.
• Several middle market carriers have implemented and/or continued an industry specialization strategy and are moving away from a generalist model. This specialization has led to the creation of bespoke products and enhancements for target industries.
• Carriers have introduced more accessible, specialized offerings in the middle market space, such as reputational risk, pandemic, active assailant, and parametric catastrophe (CAT) coverage. These solutions can provide affirmative coverage in response to emerging risks.
• Many carriers have substantial 2024 premium growth goals amid the pressures to rebalance their books and maintain profitability, which has fortunately created a competitive landscape.
• While M&A activity has yet to return in full force, carriers continue to invest in private equity practices, and they are eager to grow in this space.
• Two-tiered marketplace dynamics persist. Carriers are eager to keep “desirable” industries and classes of business out of the market, and we are seeing significant reductions when competition is introduced (e.g., financial institutions, technology, commercial real estate).
• The insureds that continue to experience hard market pressures either fall within specific industry segments (e.g., multifamily real estate, transportation, social services, food and beverage.) or have significant losses and/or heavy catastrophe (CAT) exposures. Proactive measures on risk control will play a key role for accounts in these categories.
• Property rates have continued to level off, but capacity constraints will continue to be a challenge, particularly for catastrophe (CAT)-exposed, challenged occupancies or schedules with valuation concerns. With increased scrutiny around capacity deployment, middle market clients are faced with considerable shifts to their historical program structures.
• Multiline solutions can help establish profitability at an account level, leading to sustainability in programs. With that mindset, carriers are strategically leveraging property capacity to influence their participation on casualty lines. Additional capacity is being carefully reinstated by umbrella and excess markets to gain a competitive edge on clean accounts.

Property

• Higher frequency, more severe natural catastrophes and mounting losses from unmodeled perils (such as wildfires, floods, convective storms) have strained insurer profitability. These perils are no longer viewed as secondary and account for most of the >$1 billion disasters in 2023.^[1]
• In comparison, the Atlantic hurricane season turned out to be relatively benign compared to initial predictions, which will hopefully bode well for renewed named storm capacity. However, the CSU (Colorado State University) Tropical Weather and Climate Research Team is predicting a very active 2024 Atlantic hurricane season with 23 named storms, five major named storms, including damaging Atlantic Coast landfalls.^[2]
• Property valuations continue to be of concern; however, the desired year over year (YOY) increases are not as dramatic as building cost inflation concerns recede. Nevertheless, for schedules that have not been trended appropriately, corrective action is being taken via rate, increased values and coverage wording, such as specific limits or margin clauses (e.g., Occurrence Limit of Liability (OLLE)).
• Uncertainty around valuation has also extended to business income and extra expense. With that, carriers have become more stringent on their requirements of a completed business income and extra expense worksheet.
• 2024 treaty renewals have been substantially more stable than in 2023. In 2023, cedents were forced to retain more on a net basis, thus increasing rates and reducing capacity to manage margin erosion.
• Tougher property risks that were written on a 100% single-carrier basis are being pushed to shared/layered programs due to their risk profiles and the market’s reluctance to deploy full capacity.These program restructures are prompting middle market insureds to reevaluate the cost efficiency of retaining more risk, as year-over-year increases can be dramatic.
• A proactive strategy on valuation, accurate construction, occupancy, protection, exposure (COPE), capacity and program structure will help brokers and their clients navigate these challenges. This should include a focus on both outstanding risk control recommendations and coordination of prospective carrier visits.
• Water damage coverage is experiencing higher deductibles and lowered sub-limits, and water damage mitigation is a focus.
• Given the property market landscape, alternative strategies, such as parametrics and facilities, are becoming more prevalent in the middle market space.

General liability

• While the liability market is still seeing single-digit increases, adverse reserve development is challenging insurers’ profitability. If reinsurance pressures amplify as predicted, this increased rate trend has the potential to shift in the next few quarters.
• Clients with heavy foot traffic have already begun to see a shift in pricing and limited willingness from carriers to provide additional limits on a primary basis.
• Social inflation continues to challenge the liability market as the amount of litigation and size of verdicts have increased dramatically. While most of these nuclear verdicts have been relegated to the large-client base, middle market clients will still realize the impact on general liability rates.
• Carriers are struggling to accurately project these losses in this legislative landscape and, in turn, are focused on claim management tactics and limiting capacity on challenged classes.
• Sexual abuse & molestation coverage continues to see capacity reductions and scrutinized underwriting. For hospitality and real estate accounts, there is a heightened concern surrounding human trafficking exposures.
• Habitational real estate is an extremely challenged class necessitating E&S support with more frequency. Most admitted carriers will not consider a habitational schedule due to expected loss activity.
• PFAS (Per- and polyfluoroalkyl substances) and biometric exclusions are becoming more prevalent; increased scrutiny is expected. With respect to PFAS, some carriers are willing to remove with confirmation of no exposure; however, others are taking a more stringent approach. These are both emerging topics, and carriers are concerned regarding the potential for class-action suits and the cost to defend.
• Alternative solutions, such as captives, have become more prevalent in the middle market space and will continue to be developed to fit the needs of the middle market customer.

Automobile

• The challenging legislative landscape is also the primary driver of challenged auto marketplace conditions. As aggressive marketing tactics ramp up, more attorneys are engaged in following accidents — thus directly impacting claim costs. Paradoxically, claimants are receiving less and less while attorneys’ fees increase.^[3]
• The increased average size (gross vehicle weight) and horsepower of vehicles have increased the severity of collisions. Enhanced technology in newer vehicles has also increased the cost of physical damage claims.
• Mono-line auto risks are exceedingly challenging to place and should always be leveraged with other lines of business. Even for supported auto, carriers have remarked that 10% to 12% rate increases are the “new flat.”
• Auto combined ratios continue to rise well above 100%, challenging insurers’ profitability.
• Clients with large fleets and/or fleet makeups outside of private passenger vehicles continue to see a hard market with limited capacity and an increase in cost for that capacity.
• Hired and non-owned auto continues to be heavily underwritten, and higher exposure accounts are less desirable.
• The introduction of telematics in fleets has become a risk management norm for insureds.
• The labor shortage in the trucking space has led some companies to loosen their hiring standards, thus negatively impacting loss experience.

Workers compensation

• Carriers continue to view workers compensation as a profitable line and are looking to balance their books of business by writing more of this business.
• According to NCCI, 2023 was the 10th consecutive year of profitability and the seventh consecutive year in which insurers record a combined ration below 90%.^[4]
• Middle market carriers continue to improve their program structure and dividend capabilities to differentiate themselves in a highly regulated, competitive workers compensation market.
• For guaranteed cost accounts, the continued reduction of state rates and loss costs has put pressure on carriers to adequately price certain risks.
• Auto accidents have more frequently become the cause of severe workers compensation claims over the past few years.
• Carriers are strong proponents of technological advancements that can improve worker safety and claim outcomes, such as automation, cameras, wearable devices and equipment, and AI solutions.
• Potential headwinds might arise from the shift in the workplace demographic and working patterns (e.g., aging population and more remote workforce). Mental health challenges have also become more prevalent.
• In today’s inflationary environment, there is concern that medical inflation could rise at similar levels as Consumer Price Index (CPI). Despite this concern, medical claim severity only rose 2% in 2023.^[5]

Umbrella and excess liability

• Additional capacity is being carefully reinstated by umbrella and excess markets to gain a competitive edge for desirable accounts. This capacity deployment coincides with stringent underwriting, and we expect this to continue.
• We should expect that the pressures impacting the primary casualty lines (legal system abuse, adverse reserve development, etc.) will have a commensurate effect on umbrella/excess conditions, if these trends persist; markets have begun to limit capacity on classes with heavy foot traffic as well as on classes with a large fleet exposure.
• Higher attachment points are being required by lead markets on both general liability and auto policies for higher risk industries. In these scenarios, buffer layers are being introduced more often.
• While capacity for lead umbrellas has stabilized, there is still a lack of monoline umbrella or “unsupported” lead market appetite.
• Supported leads tend to be more competitive as carriers leverage the primary lines with their umbrella capacity. In these competitive scenarios, insureds have been able to secure increased umbrella limits undoing retractions that may have happened in recent years.
• Risk purchasing groups continue to be inconsistent with increased underwriting, appetite changes, reduced capacity, large increases and market participation changes.
• Clients continue to review contractual requirements, risk transfer and limits purchased. If insured has a history of large losses, they should also be prepared to differentiate what risk management practices have been implemented to prevent similar claims.
• PFAS (Per- and polyfluoroalkyl substances) (or forever chemicals), abuse and molestation, traumatic brain injury, wildfire, assault and battery, sex trafficking and biometric exclusions are being added, or coverage and capacity have been limited, especially where exposure exists.
• Uptick in frequency of punitive awards necessitates the need for affirmative coverage (via punitive wraps or “most favorable venue” language). Punitive damage awards are the driving force behind nuclear verdicts.
• Minimum premiums have increased significantly, driving pricing higher for excess layers
• Additional capacity is being carefully reinstated by umbrella and excess markets to gain a competitive edge for desirable accounts. This capacity deployment coincides with stringent underwriting, and we expect this to continue.
• We should expect that the pressures impacting the primary casualty lines (legal system abuse, adverse reserve development, etc.) will have a commensurate effect on umbrella/excess conditions, if these trends persist; markets have begun to limit capacity on classes with heavy foot traffic as well as on classes with a large fleet exposure.
• Higher attachment points are being required by lead markets on both general liability and auto policies for higher risk industries. In these scenarios, buffer layers are being introduced more often.
• While capacity for lead umbrellas has stabilized, there is still a lack of monoline umbrella or “unsupported” lead market appetite.
• Supported leads tend to be more competitive as carriers leverage the primary lines with their umbrella capacity. In these competitive scenarios, insureds have been able to secure increased umbrella limits undoing retractions that may have happened in recent years.
• Risk purchasing groups continue to be inconsistent with increased underwriting, appetite changes, reduced capacity, large increases and market participation changes.
• Clients continue to review contractual requirements, risk transfer and limits purchased. If insured has a history of large losses, they should also be prepared to differentiate what risk management practices have been implemented to prevent similar claims.
• PFAS (or forever chemicals), abuse and molestation, traumatic brain injury, wildfire, assault and battery, sex trafficking and biometric exclusions are being added, or coverage and capacity have been limited, especially where exposure exists.
• Uptick in frequency of punitive awards necessitates the need for affirmative coverage (via punitive wraps or “most favorable venue” language). Punitive damage awards are the driving force behind nuclear verdicts.
• Minimum premiums have increased significantly, driving pricing higher for excess layers.

Industry spotlight: Healthcare

Rate predictions: Middle market healthcare

	Trend	Range
Property		+5% to +10%
Auto		+10% to +15%
Workers compensation		-5% to +5%

Property

• Loss control visits are still frequently required prior to quoting, especially for hospital systems with higher values.
• Markets for senior living risks are limited and experience higher-than-average rate increases. Frame construction or buildings without adequate sprinkler protections are even more challenging.
• Water damage and catastrophe (CAT) coverage continue to experience higher deductibles.

Auto liability

• Patient transport exposure is underwritten stringently, and carriers are comfortable with an incidental amount if any. Both non-emergency and emergency patient transport exposures are often placed separately from main fleet programs. Market options for these exposures are limited.
• Mono-line auto risks are challenging to place and should be leveraged with other lines of business.

Workers compensation

• Underwriters continue to focus on controls, safety culture and claim reconciliation or lessons learned post loss.
• Monoline placements are common, as some markets have broad comp appetites and are comfortable writing without supporting business.

Footnotes

1. 2023: A historic year of U.S. billion-dollar weather and climate disasters. Return to article undo
2. Ibid. Return to article undo
3. Legal System Abuse Adding to Increasing Auto Insurance Costs, Creating A New Asset Class of Investors Betting on Litigation. Return to article undo
4. State of the Line Report. Return to article undo
5. Ibid. Return to article undo

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Contacts

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Krista Cinotti

Head of Middle Market and Select, North America

email Email phone +1 212 915 7783

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Beth Cohon

Head of Middle Market Industry and Broking Strategy

email Email phone + 1 212 915 7898

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Adam Widdop, CPCU

Healthcare Middle Market Broking Leader

email Email phone +1 603 369 9122

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