2025 Midyear Market Outlook – Commercial Property Insurance
The commercial property insurance segment has been grappling with limited underwriting profitability and hardening conditions for much of the past decade, mainly due to surging catastrophe (CAT) losses, inflation issues and property valuation challenges. As such, ongoing premium jumps and restrictive coverage terms have become the norm for most policyholders.
Rate Trends: flat-10%
What to Expect for the Remainder of 2025
- Ongoing rate moderation
- Greater flexibility for shared and layered programs
- Emphasis on weather preparedness and property value reporting
Shifting market dynamics helped ease pricing trends throughout 2024, with average premium
jumps falling to 6% by the fourth quarter. Several factors have allowed this moderation
to continue in 2025, including more favorable underwriting results, bolstered reinsurance capacity, reduced inflationary pressures on property values and increased competition among insurers for desirable accounts. As such, industry experts reported that average rate hikes are
currently sitting just below 3%. Nevertheless, premium costs and coverage availability may vary significantly between policyholders based on the occupancy of their properties and the
severity of CAT exposures in their particular regions.
Although the commercial property insurance market has been stabilizing in recent months, rising natural disaster frequency and severity are continuing to cause extensive property damage and drive up related CAT losses.
Secondary perils—namely, wildfires and severe convective storms—have caused the most destruction so far in 2025. For nearly all of January, the Eaton Fire and Palisades Fire wreaked havoc on Southern California, burning over 15,000 structures. In May, a series of strong tornadoes and hailstorms damaged approximately 63,000 properties across the Ohio River Valley and Midwest regions. Altogether, reinsurance brokers expect insured losses from these events to surpass $50 billion. What’s worse, the National Oceanic and Atmospheric Administration projects an above-average Atlantic hurricane season with as many as 19 named storms and five major hurricanes this year.
By the end of 2025, industry experts anticipate global insured losses from natural disasters will reach $145 billion.
With this in mind, it’s evident that even a single disaster could rapidly alter market conditions. This means that all policyholders, especially those with elevated CAT exposures and increased susceptibility to secondary perils, will likely face continued scrutiny from insurers regarding their weather preparedness strategies.
As the commercial property insurance market continues to shift, a growing number of policyholders have explored alternative risk financing. There are several options available, including captives, parametric coverage and structured fronting. Captives are insurance companies formed by parent companies to insure their own risks rather than relying on third-party insurers. Under parametric coverage, the amount a policyholder is compensated isn’t decided by the exact cost of damage sustained but by the calculated intensity of the predefined event responsible for the damage, such as average wind speeds during a Category 3 hurricane. Structured fronting is an arrangement in which a licensed insurer writes a policy, but all or most of the risk is passed on to another party (e.g., a captive or reinsurer). By leveraging these options, policyholders can secure more customized coverage solutions and possible cost savings.
Looking Ahead
Moderate conditions are expected to persist in the commercial property insurance segment for the remainder of 2025, paving the way for ongoing rate stabilization, solid reinsurance treaty renewals, expanded capacity and greater flexibility from insurers, especially regarding shared and layered programs. Market conditions will be most favorable for policyholders with fewer CAT exposures and a limited history of previous large-scale claims. On the other hand, insurers will con-tinue to deploy more stringent underwriting standards for high-risk and loss-challenged accounts. Given the particularly volatile nature of this segment, policyholders should be prepared for a sudden market reversal and, in turn, potential changes in premium pricing and coverage availability following major natural disasters.
At Lawley, we understand what it means to protect businesses in the real estate industry. We have a dedicated real estate team who understands specific risks and will work will you to help you protect what you’ve worked so hard to build. To learn more, visit our real estate page or call us at 716.849.8618.
