Insurance Market 2025: Opportunities for Buyers Despite Rising Auto Prices and Claims; AIG Reports Falling Profits

The commercial insurance market for 2025 presents a dual landscape: on the one hand, a favorable environment for buyers thanks to the sector's financial strength, but on the other, significant increases are anticipated in key lines such as auto and liability. Meanwhile, giants like AIG are experiencing volatility in their quarterly results.

Navigating the insurance market in 2025 will require strategy and knowledge. Recent reports and corporate results paint a complex picture, with opportunities and challenges for both insurers and policyholders.

Willis Towers Watson's (WTW) Insurance Marketplace Realities report offers an optimistic outlook for commercial insurance buyers in 2025. Key points include:

• Buyer-Friendly Market: An environment conducive to negotiating better terms and expanding coverage is expected, thanks to the sector's strong financial health. U.S. policyholder surplus exceeds $1 trillion, and global reinsurance capital exceeds $700 billion.
• Capital and Competition: Abundant capital drives insurers to pursue growth, adopting broader underwriting strategies, and fostering competition.
• Increased Capacity: An increase in available capacity is observed, even in previously restricted sectors such as excess casualty.
• Innovation: New policy solutions and approaches are emerging, such as tariff coverage and innovative facilities like Willis' Gemini auto-follow facility .

However, this overall strength coexists with macroeconomic challenges—supply chain issues, unpredictable tariffs, financial volatility—and so-called “social inflation,” i.e., rising claims costs due to social and legal factors, which are putting pressure on the sector's margins.

Despite the overall favorable environment, WTW's price predictions for 2025 show significant increases in several key lines:

• Large Increases:
  • Auto: +10% to +20%
  • Umbrella/Excess (High Risk): +10% to +15% / +7.5% to +15%
  • Umbrella/Excess (Low Risk): +7.5% to +12.5% ​​/ +5% to +12%
  • General Civil Liability: +2% to +8%
  • Errors and Omissions (Large Law Firms): +2% to +8%
• Stability or Lows:
  • Property (Not exposed to CAT): -5% to +5%
  • Workers' Compensation: -5% to +2%
  • D&O (Directors and Officers – Primary Public): -3% to stable
  • D&O (Private/Non-Profit): -10% to stable
  • Cyber: -5% to +5%
  • Terrorism: -10% to -2.5%
• Mixed/Variable:
  • Property (Exposed to CAT): -10% to +10%
  • Political Risk: stable at +20% (up to +50% for China-related risks)

This disparity suggests that while capital is available, specific factors such as high auto accident rates, large legal verdicts (social inflation), and catastrophic risks continue to drive up prices in certain segments, outweighing the general trend of increased competition.

"The insurance market is a giant with many legs. While the head (capital) is strong, some legs (lines like auto) feel the pain of the claims," ​​explains an industry analyst.

The sector's volatility is reflected in the results of major players. AIG reported a 71% drop in net profit for the first quarter of 2025 compared to the previous year. Despite this:

• Net written premiums in the General Insurance segment remained stable at $4.5 billion.
• The international division grew 5% in net premiums ($2 billion).
• The company returned $2.5 billion to shareholders (buybacks and dividends) and declared a new quarterly dividend.
• CEO Peter Zaffino called the start to 2025 "excellent," despite the drop in profits.

This situation at AIG, one of the largest global insurers, in the face of a theoretically strong market, underscores that individual company profitability can be affected by specific factors (potential investment losses, reserve adjustments, large claims) that are not necessarily reflected in overall market capital levels.

The sector is also seeing technological advancements, such as the use of Artificial Intelligence (AI) for preventive life insurance, seeking to shift from reactive to proactive coverage. Additionally, mergers and acquisitions in the insurtech space continue, such as COVU's acquisition of CIII Insurance Services.