Spring 2025_State of the Market

STATE OF MARKET THE

SPRING 2025 COMMERCIAL INSURANCE PRICING TRENDS

UnisonRiskAdvisors.com

The insurance market continues to navigate a complex landscape shaped by evolving risks, regulatory changes and economic uncertainties. While some sectors experience stabilization and even softening, others face persistent challenges that demand strategic risk management and proactive adaptation. New tariffs have added another layer of complexity to all commercial lines of insurance as tariffs often lead to increased raw material costs, supply chain disruptions and reduced demand for commercial insurance. Casualty Lines remain under pressure, with Umbrella and Excess Liability markets grappling with social inflation and rising claims costs. Commercial Auto Liability continues its trend of premium increases, driven by underwriting losses and the unique risks associated with fleet electrification. General Liability , while slightly less challenging, still contends with litigation expenses and increasing settlement sizes. Workers' Compensation stands out as a relatively stable line, benefiting from market competition and lower loss frequency. The Property market shows signs of a fragile softening after a period of intense hardening. Catastrophic events and climate change continue to impact premiums, particularly for coastal and high-risk areas. The Marine market sees softening rates and increased capacity, while Executive Risk lines like Directors & Officers insurance trend towards stabilization with a focus on enhanced coverage and value. Cyber Liability remains a dynamic and competitive market, with new entrants and abundant capacity driving favorable conditions for buyers. However, the threat landscape continues to evolve, with sophisticated cyber incidents and privacy litigation concerns on the rise. Unique industry challenges persist. The Education sector is faced with social inflation, rising claim costs and demographic shifts, while the Healthcare industry contends with nuclear verdicts, cyberattacks and workforce shortages. The Design & Construction and Real Estate sectors are experiencing moderated rate increases and ongoing challenges related to material costs, litigation and capacity constraints. Meanwhile, Mergers & Acquisitions activity, though slower than anticipated, holds potential for a surge as economic conditions stabilize. As organizations navigate this evolving market, it is crucial to work closely with brokers to implement proactive risk management strategies. By understanding industry trends and taking informed steps, businesses can secure favorable insurance terms and enhance their resilience in the face of emerging risks. STATE OF THE MARKET SPRING 2025

CASUALTY LINES »

PROPERTY »

EXECUTIVE RISK »

CYBER »

INDUSTRY SPOTLIGHTS »

LOOKING FORWARD »

CASUALTY LINES

UMBRELLA/EXCESS LIABILITY

COMMERCIAL AUTO

GENERAL LIABILITY

WORKERS’ COMPENSATION

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Umbrella/Excess Liability Discontent in the world is spilling into the jury pool, leading to extreme out-of-court settlements. The market for Umbrella and Excess Liability continues to face challenging dynamics and rate pressure. Umbrella policies in particular present significant hurdles in building and completing casualty programs by the effective date. Typically, the Umbrella is the lowest layer in the tower and presents significant multi-million dollar claims to insurers. When small blocks of capacity are at play, insurers are not defending as they should. With the more recent tower model and smaller blocks of capacity, insurers tend to tender limit and/or settle. Historically, blocks of 25M to 50M were at play and insurers would defend vigorously. Insurers are now focusing on offering controlled line sizes to manage capacity. Social inflation is a primary driver of adverse loss reserve development for commercial liability lines. Several factors contribute to social inflation, such as negative public sentiment towards large corporations, increased third-party litigation funding, legal advertising and large nuclear verdicts. While actuaries depend on historical loss patterns to estimate unpaid liabilities, and economic inflation introduces estimation challenges within a predictable range, social inflation poses a more significant threat. Large nuclear verdicts establish precedents that encourage plaintiffs in other open claims to demand similar awards, potentially rendering existing reserves inadequate. Four London insurers closed their doors in 2024, and new capacity is limited. Excess insurers that were highly competitive in 2024, writing at lower attachments, have now increased their attachment to 25M and will only offer 10M in capacity in the first 100M. Concerns of offering capacity with the first 50M remain increasingly high as insurers deem this as the burn layer due to the rise of nuclear verdicts. Our Recommendations: › When building excess of the lead Umbrella, seek larger line sizes as they tend to arbitrate, which is preferred. › Invite new capacity into marketing efforts. This will not only offer the most leverage but also promote stability in terms of additional appetite and staying power. › Insureds are encouraged to take higher attachments on complex programs. High hazard/challenged classes of business can expect 10% to 15% increases; moderate to low hazard should expect 5% to 10%.

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Commercial Auto Liability Despite consistent rate increases, Commercial Auto coverage continues to cause underwriting losses for insurers and rate pressure for insureds. Commercial Auto experienced the highest average increase in premiums out of all lines for Q4 2024, at an average of 8.9%. This marks the 54th consecutive quarter of premium increases for Commercial Auto lines.

Q4 2023

Q1 2024

Q2 2024

Q3 2024

Q4 2024

7.3%

9.8%

9.0%

8.5%

8.9%

The current U.S. Auto Liability market remains difficult for many insureds to navigate, despite investments in risk management practices. Objectives to prioritize are learning and education, providing quality data, data interpretation and incident tracking. A report by AM Best found the average loss per commercial liability claim has doubled since 2014. Increased claim frequency and severity are associated with higher premium costs. Additionally, the recent uptick in fleet electrification can lead to higher premiums due to the unique risk profile of electric vehicles. Ongoing challenges for Commercial Auto include vehicle repair cost inflation, driver shortages, more aggressive litigation and increased frequency of distracted-driving accidents. Insurers will demand increased rates, and organizations using fleets of heavy autos or large hired/non-owned exposures (such as delivery operations) will see the largest price increases.

Our Recommendations: › Focus efforts on reducing fleet size and continuing to minimize risk.

› Insureds are encouraged to take higher retentions on the primary. High hazard/challenged classes of business can expect 10% to 20% increases; moderate to low hazard can expect 5% to 10%.

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General Liability According to the Council of Insurance Agents and Brokers (CIAB), while General Liability is not as challenging as Auto or Umbrella Liability, it remains a significant area of concern for insurers due to litigation expenses and increasing settlement sizes. General Liability is the traditional first line of defense for Premises and Product Liability, both areas leading to greater frequency, severity and larger verdicts. Habitational is an extremely challenging class of business due to premises frequency and a rise of assault and battery and firearm incidents. Coverage for firearms in GA has become scarce, despite lender requirements on the rise for this coverage grant. Overall, increased limits such as a 2M/4M structure and expanded coverages are generally limited and controlled tightly by underwriting appetite guidelines. Sophisticated risk managers and C-suite executives responsible for insurance spend are responding to the challenges posed by social inflation by strategically incorporating elements of risk financing. Mid-sized and large organizations have long used risk financing in primary casualty programs. These elements include self- insured retentions, deductibles, structured programs and captives. For those that currently deploy strategic risk financing mechanisms, utilize retention analysis and various analytic tools for decision support, as retentions should naturally increase over time.

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Workers’ Compensation As 2025 began, the U.S. Workers’ Compensation insurance market was poised to maintain its overall stability. The market continues to perform strongly but emerging challenges and demographic shifts could drive up claim costs. Future trends to consider include the legalization of marijuana in the workplace, stress as a claim and overall claim severity. Due to its profitability, Workers’ Compensation is required by most carriers to consider alongside General Liability and Automobile lines. Rates continue to experience decreases driven by market competition, reforecasted exposures, remote work and lower loss frequency. Of all casualty lines, Workers’ Compensation is the only line of business experiencing rate reductions. Expected renewal rates are anticipated at -5% to 5%, based on industry and blend of class code. Premium Change for Workers’ Compensation | 2014 - 2024

0 1 2 3 4 5

Q1 2014 4.1%

Q1 2021 1.0%

Premium Change for Workers’ Compensation 2014 - 2024

Q1 2022 0.3%

Q1 2023 -0.5%

Q1 2015 -0.4%

Q1 2020 -1.2%

Q1 2017 -1.9%

-5 -4 -3 -2 -1

Source: CIAB Q4 2024 Commercial Property/ Casualty Market Index

Q1 2018 -2.0%

Q4 2024 -1.8%

Q1 2024 -1.8%

Q1 2016 -3.0%

Q1 2019 -3.3%

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PROPERTY

COMMERCIAL PROPERTY »

MARINE »

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Commercial Property The 2025 Property insurance market has been described as having a fragile softening. After an intense hardening in 2023, the market began stabilizing throughout 2024. The premium increases in the last two years are as follows:

Premium Change for Commercial Property | 2014 - 2024

Q1 2023 20.4%

Premium Change for Commercial Property 2023 - 2024

Q2 2023 18.3%

Q3 2023 17.1%

Source: CIAB Q4 2024 Commercial Property/ Casualty Market Index

Q4 2023 11.8%

Q1 2024 10.1%

Q2 2024 8.9%

Q3 2024 7.9%

Q4 2024 6.0%

General Observations: › Fragile softening of the market. › Valuation remains essential (and could become increasingly so). › Expect deductibles to remain high.

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Climate Change Several Catastrophic (CAT) events had devastating impacts in the U.S. in 2024 and the beginning of 2025. › Hurricane Helene (Sept 24, 2024): Estimated total insured losses of $10.5 to $17.5 billion. Primarily a heavy flooding event with 30 inches of rainfall over three days in Western North Carolina. › Hurricane Milton (Oct 5, 2024): Estimated total insured losses of $17 to $28 billion. Originally headed for the highly populated Tampa Bay area, the storm made a turn south to a less populated area. › California Wildfires (Jan 7 - 31, 2025): Estimated total insured losses of $35 to $45 billion as 14 destructive wildfires swept the Los Angeles metropolitan area. › Convective Storms (All of 2024): Estimated at $100 billion. Storms have become increasingly severe and have extended geographically into the upper Midwest. Due to the corrective actions taken in 2023 and 2024, along with positive investment income in 2024, carriers were better positioned to handle these events. As a result, these events only had a modest impact. January 2025 reinsurance treaties, often an indicator of overall pricing, were favorable. Reinsurance pricing remained flat but with higher attachment points and tighter event definitions. Reinsurers have shifted from Frequency Protection to Severity Protection, with retention levels remaining generally aligned with those from 2024. Insurance for Habitational Properties remains challenging, with higher retentions established in 2023/2024 and continuing into 2025. The fragile softening on rates applies here. Insurance for office buildings presents fewer challenges, as some vacancy issues have subsided with businesses gradually returning to their office settings most workdays. The strict carrier scrutiny on replacement cost valuation seen in 2023 and 2024 has leveled off in 2025. However, recent tariffs have introduced uncertainties regarding the cost of building materials. It’s crucial to monitor your Extra Expense Limit on Equipment Breakdown coverage, as import costs and supply chain disruptions may impact the replacement cost of equipment.

Our Recommendations: › Be proactive about valuations. › Address all recommendations from loss control visits. › Close open claims to the extent possible. › Take preventative measures to reduce repeated similar claims. › Create a Water Mitigation Plan (a map of shut-off valves).

› Implement a Business Continuity Plan to reduce business interruption. › Keep records of building upgrades (roofing, electrical, HVAC). › Conduct reserve studies to fund future capital improvements. › Communicate all of the above in your renewal submissions

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Marine

Cargo & Stock Throughput › The cargo and stock throughput market continues to experience softening rates and an appetite for growth. › Carriers are offering flat renewals or rate reductions on renewals with good loss records. › Increased capacity and competition from MGAs entering the market are providing large stock limits and broad coverage terms. › Insurers continue to diligently analyze catastrophe exposures and insureds’ building constructions and protection measures. › Current geopolitical events require increased scrutiny from brokers and insureds to ensure adequate limits. › The potential impact of tariffs on port and shipment activity is being closely monitored. Our Recommendations: › Start the renewal process early with the robust submission details, especially relating to stock inventory programs to allow for program redesign. › The uptick in theft claims is a hot button for underwriters; robust security standards in place prior to renewal will realize the most favorable results. › Continue to check inventory values at regular intervals to ensure proper adequacy of limits.

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EXECUTIVE RISK

DIRECTORS & OFFICERS »

FIDUCIARY »

EMPLOYMENT PRACTICES LIABILITY »

CRIME »

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Directors & Officers The Directors & Officers (D&O) insurance market is now trending towards stabilization after a period of significant rate reductions. Insurers are emphasizing value beyond pricing, such as enhanced coverage and increased sub-limits. While premium decreases are still present within the marketplace, insurers are expected to push for flat renewals. Private Companies & Nonprofits › Competition and capacity remain high, with most insurance carriers looking to grow their respective books of business. › For smaller risks, insurers are providing automatic renewals with little or no underwriting information to keep renewal pricing flat or add a couple points of rate. › Private companies continue to face risks typically associated with public companies, including: • Shareholder/breach of fiduciary duty complaints • Regulatory issues • Bankruptcy/Insolvency • Alleged unfair business practices • Geopolitical issues • Economic uncertainty, including the impact of tariffs, interest rates and a potential recession • Increased litigation costs • AI utilization Public Company D&O › According to a recent release from Cornerstone Research, the number of federal and state securities class action lawsuits filed increased in 2024 for the second year in a row, reaching the highest level since 2020. › One significant factor contributing to the overall increase in securities class action lawsuit filings in 2024 was the significant number of theme-related filings: • AI-related filings increased to 15 in 2024, compared to only seven in 2023. • COVID-19-related filings increased from 11 in 2023 to 15 in 2024. • SPAC-related filings decreased from 27 in 2023 to 11 in 2024. Overall, these three trend categories (AI, COVID-19, and SPACs) accounted for nearly 20% of all 2024 securities lawsuit filings. › Financially sound public companies continue to experience a competitive D&O environment with plenty of capacity. › While softer market conditions continue, incumbent underwriters are expected to hold premiums closer to flat compared to last year. › As capacity remains available, continued competition for excess layers is anticipated. › Underwriters are expected to closely monitor claims trends, which may lead to more selective underwriting. › There are mixed opinions on regulatory enforcement under the new administration, with expectations that the focus of investigations will change. › The continued impact of artificial intelligence (AI) and cyber threats may signal a changing claims environment. › Tariffs, lingering inflation and a potential recession could weigh on investor confidence and the IPO market.

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Fiduciary Similar to Fall 2024, rates are projected to remain flat to -5%. Underwriters are focusing on renewing at flat rates to ensure profitability in this line of coverage. This approach is essential for maintaining market stability and providing consistent coverage options for policyholders.

Filings Filings were down in the first half of 2024 but increased in the latter half of the year.

Excessive Fees › As discussed in prior reports, excessive fees remain the central underwriting concern with additional issues emerging due to the complexity of ERISA law. › Litigation remains robust and is now extending into health and welfare plans, coupled with forfeiture claims alleging that plan sponsors who use forfeitures to offset future employer matches do not benefit plan participants. Trump Administration Impacts › Fiduciary Rule Regulatory Freeze: The freeze on the implementation of new rules, including the 2024 Retirement Security Rule, has created uncertainty for fiduciaries and insurers. This rule aimed to define investment advice fiduciaries under ERISA, but its delayed implementation increases the risk of litigation by plan participants. › Executive Orders on DEI: Recent executive orders targeting diversity, equity and inclusion (DEI) initiatives may impact fiduciary responsibilities. Investments in funds that prioritize ESG (Environmental, Social and Governance) principles, including DEI, might be scrutinized for potentially violating fiduciary duties.

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Employment Practices Liability The outlook for Employment Practices Liability remains steady. Despite insurers' concerns about declining profitability, political uncertainty and economic challenges, insurers continue to demonstrate strong interest in providing capacity. This suggests that rates will likely remain unchanged from the fall report, with flat to -5% being easily attainable in the market.

EEOC Activity: EEOC activity continues to rise, reflecting a consistently complex employment landscape. State-Specific Legislation: The increase in state- specific legislation poses compliance challenges for multi-state employers. Biometric Privacy Compliance: Compliance with biometric privacy laws will remain difficult due to the absence of federal employee privacy legislation to establish a clear national standard. Impact of Administration Change: The new administration’s policies may weaken worker protections, such as bargaining power and benefits for independent contractors, though the full impact remains to be seen.

LGBTQ Protections: The rollback of protections for LGBTQ individuals by the current administration, including healthcare non-discrimination protections under the Affordable Care Act, complicates compliance for employers operating in multiple states with varying laws. EEOC Clarification: The EEOC has clarified that DEI initiatives cannot override legal prohibitions against using race, sex and other protected characteristics in employment decisions. EEOC & DOJ Guidance: On March 19, 2025, the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Justice (DOJ) released new guidance on DEI and workplace discrimination, aiming to clarify how DEI initiatives can be implemented without violating anti-discrimination laws.

The additional guidance documents from the EEOC and DOJ regarding “unlawful discrimination” related to diversity, equity and inclusion may either improve the landscape for Employment Practices Liability or complicate it further.

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Crime White-collar crime continues to increase and incidents are becoming more sophisticated. Economic instability creates a challenging environment for crime underwriting, requiring proactive measures to manage associated risks. The rate outlook for crime coverage is flat to less than 3% for those with solid internal controls.

Employee Dishonesty: Claims involving rogue employees are on the rise, both in frequency and severity. Many fraudulent schemes that began during the pandemic when internal controls were compromised are now being uncovered. This trend underscores the need for robust oversight and stringent internal controls to detect and prevent employee dishonesty. Poor Vendor Management: Inadequate vendor management processes provide an easy gateway for both employee dishonesty and social engineering fraud. These vulnerabilities are increasingly being exploited, highlighting the importance of implementing comprehensive vendor management protocols to safeguard against such risks. Check Forgery: The incidence of check forgery continues to escalate, manifesting through altered, forged, washed or counterfeit checks. This persistent threat requires vigilant monitoring and advanced detection techniques to protect against financial losses.

Economic Concerns: Sweeping changes in Washington have sparked fears of an economic downturn, increasing the likelihood of financial crimes such as fraud, embezzlement and money laundering. Individuals and businesses facing financial stress may resort to illegal activities to mitigate their economic challenges, making it crucial for companies to enhance their financial oversight and fraud prevention measures. Underwriter Diligence: Underwriters are expected to remain diligent regarding controls and processes. They will likely award capacity and favorable terms to organizations that demonstrate state-of-the-art internal controls and processes.

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CYBER

CYBER LIABILITY »

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Cyber Liability

Cyber Market Overview › Entering Q2 2025, the Cyber market remains stable and increasingly competitive, fueled by new entrants and an abundance of capacity. Depending on a program’s existing premiums, changes in revenues, claims activity and changes in controls, renewals range from flat to 10% - 20% decreases. › While the marketplace is favorable for buyers and new entrants, cyber incidents have not slowed down. Increasingly sophisticated threat actors, exploitation of zero-day vulnerabilities and attacks on large software providers have resulted in ransomware attacks, vendor data breaches and complex social engineering attacks. Threat Landscape › According to cyber extortion services firm Coveware, the average ransomware payment in Q4 2024 was $553,959. While this represents an 16% increase from the prior quarter, this may be attributed to outlier ransom payments. › Median ransom payments, which better represent the market, decreased by 45% to $110,890. Data shows that only 25% of companies are paying ransom demands due to improved security controls, law enforcement efforts to dismantle cybercriminal groups and increased resilience. › Email phishing, business email compromise and social engineering events continue to be major loss leaders. These can have coverage implications on both cyber and crime policies. Review both policies with your broker to avoid coverage gaps. › Privacy litigation concerns are still rising for data security disclosures, biometric collection, and pixel and web tracking technologies, along with increased regulatory investigations and reporting requirements. › The number of data breach-related class actions continues to rise. According to Duane Morris LLP's 2025 Data Breach Class Action Review , the data breach class action lawsuits filed have increased by nearly 400% from 2021 to 2024. › Securities lawsuits alleging negligence, lack of board oversight on cybersecurity and failure to properly manage cyber risk have resulted in Directors & Officers liability claims. This has raised concerns for chief information security officers and the risk of personal liability given their roles and responsibilities.

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Underwriting › Underwriting guidelines around cybersecurity controls have remained largely consistent over the past two years. Insurers expect a minimum standard of security controls, which become more stringent the larger and more complex an organization is. › Due to the prevalence of systemic and supply chain events, third-party and vendor risk management will experience additional scrutiny in 2025 and beyond. As insurers work to better understand and quantify supply chain risk across their portfolios, the scope of dependent business interruption coverage may be challenged.

› For renewals, in addition to providing updated responses within cyber insurance applications, insureds should also aim to demonstrate continuous improvements to their insurers, either via underwriting calls or through written addendums. › For industries with greater exposure to privacy risk, underwriters are requesting biometric and web tracking supplemental questionnaires. This information is critical for insureds seeking affirmative wrongful collection coverage.

Our Recommendations: › Start the renewal process early for a smoother renewal. Work with your broker and your InfoSec team or Managed Service Provider (MSP) to complete the cyber insurance applications, incorporating feedback from all relevant stakeholders. Discuss a cyber marketing strategy with your broker to better understand emerging risks and evolving underwriting requirements. Continue to assess limits adequacy using data and analytics with feedback from senior stakeholders (CISO, CIO, CTO, RM, GC, CFO, etc.). › Focus on demonstrating continued improvements in cybersecurity and resiliency to underwriters to lock in a favorable renewal outcome. While applications contain several questions that portray your security posture to the underwriters, they may not tell the full story. Speak with your broker and develop relationships with incumbent insurers where possible to create long-term partnerships. › Understand the cyber claims process and policy vendor requirements, integrating both into your incident response plans on an annual basis depending on your primary insurer. › Review the risk management resources, tools and solutions available to you as a policyholder. Lean on your broker to help facilitate introductions and maximize the value of your cyber insurance policy.

Cyber RiskScript The Unison Risk Advisors Cyber RiskScript process is designed to help clients navigate their cyber insurance renewals seamlessly from preparation to program administration. This process offers various resources, promotes cyber risk resiliency, identifies new opportunities for improvement and drives favorable cyber insurance outcomes.

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INDUSTRY SPOTLIGHTS

DESIGN & CONSTRUCTION

EDUCATION »

HEALTHCARE »

MERGERS & ACQUISITIONS

REAL ESTATE »

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Design & Construction Rate increases for the construction industry have moderated compared to prior years, with an average rate increase of 5.4% for all major lines of coverage according to the Council of Insurance Agents and Brokers. However, new tariffs pose significant and widespread implications for the sector, potentially causing project delays due to increased material and equipment costs. This also contributes to higher builder’s risk limits and increased automobile physical damage costs associated with more expensive imported goods.

Automobile The average annual Automobile rate increase was 8.9% in 2024, representing the 54th consecutive quarter of rate increases. This sustained upward trend is driven by persistent adverse loss rations, higher liability verdicts influenced by social inflation and the impact of third-party litigation funding. Furthermore, large fleets (over 500 power units) are facing restricted insurer capacity and higher rates due to reinsurance market conditions. General Liability Rates remain stable with low single-digit increases. Workers’ Compensation Rates remain stable with flat increases and no significant changes. Umbrella & Excess Liability Mirroring the trends in Auto Liability, Umbrella & Excess Liability layers experienced an average rate increase of 8.7% in Q4 2024. Insurers are maintaining restrictive capacity, often offering limits of $5 million or $10 million and increasingly utilizing quota-share arrangements with other insurers to provide coverage.

Contractor’s Professional & Pollution Liability Rates remain flat to +5%. However, more contracts are requiring higher insurance limits. Historically, a subcontractor may have only needed to provide $1 million limits to meet contract requirements. Today, depending on the scope of work, that same subcontractor may be required to provide $2 million, $3 million or even $5 million in limits. Property & Equipment Permanent Property & Equipment saw 5 to 7% rate increases due to the reinsurance costs of insurers, which are a result of recent catastrophic events. Builder’s Risk Frame construction continues to be a major challenge. Insurance underwriters require more detailed information about the project, schedule, site conditions and protective safeguards such as site security and water monitoring. Underwriters are imposing sub-limits for named windstorms in coastal areas and have pulled back on offering the LEG3 endorsement at full policy limits since two legal cases in 2024 affirmed coverage in favor of the insured. Additionally, extensions for builder’s risk policies continue to be habitual and problematic.

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Education As we approach July 1st, one of the busiest times for school insurance renewals, the industry continues to navigate a challenging and persistent hard market for liability. General Liability, Excess Liability and Educators Legal Liability are significantly impacted by:

› Social inflation › Third-party litigation financing › The rising cost of claims

› Reviver statutes for abuse › Expanding duty of care › Antitrust claims within higher education

› Claims from student mental health › Ongoing concern of the looming demographic cliff

These challenges and their impact on premiums are placing pressure on already stressed budgets as institutions navigate enrollment challenges, wage inflation and other inflationary impacts on goods, services and materials.

Liability Market Impact While antitrust claims are primarily limited to elite higher education institutions, their impact on the liability market for certain insurers will affect all institutions. Social inflation and rising claim costs will impact all insurers, many of which have limited choice of counsel, increased retentions, and modified defense and settlement strategies. The suspension of statute of limitations for abuse claims continues to affect insurers’ balance sheets and, depending on the age of the allegations, impacts the availability of insurance for schools. In some cases, schools cannot access policy records from the 1960s and 1970s; even if they do locate coverage, the limits are often far lower than what institutions currently purchase. As a result, liability insurers for education are pushing higher rates and evaluating how much capacity they are willing to deploy to the market. For institutions that purchase high excess limits, budget, risk tolerance, retention levels and program structure (claims made, retained limits, buffer layers) are key considerations for the upcoming renewals. Additionally, institutions in regions known for challenging litigation environments (plaintiff- friendly) will face even higher costs.

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Risk Management Strategies To combat these issues, institutions should continue to promote their risk management efforts (policies, procedures, training, business continuity) to the insurance markets as part of their renewal strategy. There are segments of the market, including Cyber and Workers’ Compensation, that are highly competitive; marketing these coverages to ensure favorable results can help soften the impact of premium increases on General Liability and Excess Liability. Property Insurance Property insurance rates have stabilized compared to recent years; however, insurers are frequently pushing higher water damage and wind deductibles in certain geographies due to convective storm losses. Schools should continue to document upgrades to building systems, roofs, water detection and other mitigation strategies to drive favorable outcomes at renewal. Our Recommendations: › Implement and maintain robust risk management strategies. Promote these efforts to carriers to secure more favorable coverage outcomes. › Proper planning is critical to a successful renewal. School administrators should work with their broker to start the renewal process early, be strategic in the remarketing of accounts, budget accordingly and ensure that any changes (carrier, structure, deductibles) align with your operational goals and long-term risk financing strategy.

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Healthcare The core risks of the healthcare industry have largely remained unchanged in the first quarter of 2025. Nuclear verdicts, a challenging malpractice market, cyberattacks, workforce shortages, abuse claims and workplace violence issues continue to dominate the headlines. It is more crucial than ever for healthcare leadership to prepare for the industry’s dynamic risk landscape. Medical Professional Liability Nuclear Verdicts: The severity and frequency of high-dollar cases are increasing and courts are working to clear backlogs from the pandemic. Recently, a St. Louis jury awarded $48.1M in a birth injury case, the largest malpractice award in Missouri history. Higher Excess Layers: These layers are experiencing significant rate increases due to their volatility, with increases ranging from 25% to 50%. Shrinking Capacity: Carriers are reducing capacity, with some only offering limits of $5 million. Syndicated programs are becoming essential. Exclusions: Some carriers are beginning to exclude sexual abuse and molestation or offer significantly reduced sub-limits. Premium Increases: Average premium increases range from 10% to 40%, with a large focus on underlying retention. New Markets: There are new markets and capital on the hospital/facility side, as well as in the miscellaneous medical space.

Senior Living: Litigation challenges continue with provider documentation under attack and skyrocketing demands.

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Key Trends in Healthcare Cyberattacks: Breach notices from the February 2024 Change Healthcare cyberattack are emerging, now with an estimated 190 million people affected. The July 2024 CrowdStrike event also saw continued supply chain attacks on the healthcare industry. Geopolitical risks in healthcare cyber space remain a concern with heightened awareness of any potential disruptions. Supply Chain Disruptions: These continue, especially for medically necessary medications, potentially causing delays in care. Workforce Shortages: Despite a slowdown in agency staffing in 2023, the industry still faces medical professional workforce shortages, posing risks to high-quality care delivery. Abuse Claims: Insurers are interested in chaperone policies and procedures to ensure appropriate safeguards in the event of abuse claims. The number of sexual abuse and molestation claims continues to disrupt the insurer and reinsurer market.

Financial Pressures: Rising healthcare costs driven by inflation could impact organizations' ability to provide services to patients. Workplace Violence: This remains a top concern in healthcare settings. Active assailant and workplace violence liability products can help mitigate prolonged litigation stress by providing immediate response to victims. Social Engineering & Crime Risks: These remain prevalent, offering opportunities for threat actors to infiltrate healthcare networks and financial systems. Property & Natural Catastrophe Rates: With recent rate increases slowing down, independent appraisals and modeling are crucial for capitalizing on market conditions. Workers' Compensation & Management Liability: These lines are in a favorable market with increased competition and the ability to leverage coverage enhancements.

Our Recommendations: › Work with your strategic advisor and risk management team to begin the renewal process early, position risk appropriately and set expectations for potential changes in structure and pricing. › Evaluate property and building valuations to combat insurer rate increases. › Participate in and take advantage of cyber carrier resources for tabletop exercises. › Keep emergency preparedness and risk management considerations front of mind as service disruptions can result in significant financial challenges. › Evaluate self-insurance alternatives to ease market fluctuations, especially in medical professional liability lines.

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Mergers & Acquisitions Despite expectations for a strong 2025, new deal activity in mergers and acquisitions (M&A) has been slower than anticipated due to economic, geopolitical and regulatory uncertainties, along with long-term interest rate volatility. However, significant capital remains available, suggesting a potential surge in deal activity, though the timing is uncertain. Financial Buyers Landscape Private equity firms and investor groups typically lead the charge in terms of new deal activity, however market volatility and economic uncertainty has curved financial buyers’ appetites to bring on new assets in into the portfolio in Q1 2025 and, instead, focus on improving their existing portfolio. Valuations have dropped about 20% since their peak in 2021, with valuation volatility from 2022 to 2024. Pitchbook reported that while EV/EBITDA multiples increased in 2024, EV/Revenue multiples decreased. EV/ Revenue multiples are largely indicative of corporate/strategic deals vs. financial deals. Despite this, 2024 was a strong year for private equity deal count, although the volume of deals, especially in the lower-mid and middle-markets, decreased by about 18% year-over-year.

4,505

3,655

3,316 (estimated)

Private Equity Middle Market Deal Activity 2021-2024 Source: Pitchbook 2024 Annual US PE Middle Market Report

3,088

$518.4B

$379.1B

$320.5B

$374.1B

2021

2022

2023

2024

Deal Value

Deal Count

While new platform activity has slowed a bit, add-on activity has continued to persist as companies look to supplement organic growth with acquisition growth.

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Due Diligence Areas of Importance Cybersecurity: TThe technology sector remains active due to demand for innovative solutions and AI advancements, specifically with the new administration’s joint venture with OpenAi early in their term. Multi- factor authentication (MFA) and the placement of an internal Chief Information Security Officer (CISO) are favorable. We have access to tools that can assess the external cybersecurity of targets to better protect your organization. Further, buyers should have their advisors review first-party vs. third-party liability along with the security and controls of third-party vendors and partners to avoid collateral damages from any breach along a seller’s supply chain. Benefits & AI Resources: Healthcare costs continue to rise with medical and prescription claims trend increasing exponentially. For lower middle market add-on acquisitions, claims data is often unavailable for employers with under 100 employees enrolled on the health plan. Essentially, a buyer may blindly inherit the claims risk that comes with a target. AI tools can be used to assess a population’s claims data. By obtaining a single census during due diligence, we are able to understand the health risk of the population which influences our post-closing integration plan and decision making. Employee benefits compliance will remain a key focus during due diligence. The ‘red flags’ typically involve compliance with the Patient Protection and Affordable Care Act (PPACA) and ERISA. Future fines for noncompliance are expected. Representations & Warranties Considerations Representations and warranties insurance (RWI) rates continued to drop in 2024 due to the M&A slow down. Rates are expected to stabilize in 2025 as deal activity rebounds. Consequently, underwriter capacity will decrease and claims will start to trickle in. Additionally, underwriters are accommodating lower middle-market deals (sub $100M EV) to backfill their pipelines. Private Equity remains the leading user of RWI, utilizing it in the vast majority of their transactions. Strategic buyers are also beginning to use RWI more frequently, with 35 to 50% of strategic deals depending on various factors such as size and quality of due diligence. Price & Coverage RWI rates dropped in 2024 due to reduced deal activity and new carriers entering the market. The M&A market has seen a reduction in the number of deals utilizing RWI over the last twelve to eighteen months. As a result, insurers are competing over fewer deals and offering more attractive terms. Coverage amounts typically range between 10% to 20% of enterprise value (EV), with premiums between 2.4% to 3.0% of the coverage amount. For example, a $10 million limit may cost $240,000 to $300,000. Retention (similar to a deductible) amounts vary based on the size of the transaction, and range 0.5% to 1.0% of EV. Claims RWI claims increased in 2024, due in part to lowered retention levels, which results in the policy limit being triggered sooner, more transactions being insured and the severity of claims increasing. Breaches of representations related to inaccurate financial statements remain the most significant area of claims, with customer & contract representation issues on the rise. Other areas include compliance with laws, litigation, employee related matters, and IP & IT matters

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Real Estate

Property › Increased capacity in the Property market led to heightened competition in 2024, a trend expected to continue through 2025. Carriers are focusing on account retention, growth and profitability, signaling rate moderation. Despite some softening due to new entrants and increased capacity, there is still pressure in the Property market, particularly concerning real estate. Carriers remain focused on property protections, CAT- exposed risks and asset classes, with certain risks continuing to face challenges. › Coverage enhancements should be explored for all property risks, especially at renewal. The hardening market led to the elimination of many blanket policies and reduced loss limits, which should be revisited along with broader policy forms, higher sub-limits and optimized deductibles. CAT limits and deductibles should also be reassessed. › Significant rate decreases are expected for loss-free and best-in-class accounts on shared/layered placements, with targeted decreases between -5% and -15%. More loss-prone accounts could see rate increases of up to +10%, while others may remain flat depending on loss history. Single carrier placements will experience different results, but flat renewals should still be targeted, with marketing efforts to outside competition to apply pressure on incumbent markets. Improvements in terms and conditions should also be explored alongside seeking rate relief from insurers. › The California wildfires in early 2025 are anticipated to shift carrier focus to these exposures, with wildfire scores closely examined. › Valuations will be less of a hot-button issue in 2025 but still require consideration, especially for older buildings or portfolios undervalued during the 2024 renewal. Many owners are looking to refinance or purchase distressed assets, prompting mortgage lenders to reassess valuations. Despite providing blanket coverage in a portfolio, lenders may request higher valuations for certain assets. It is crucial to review valuation methodologies with clients and challenge lenders on their calculations.

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Casualty The real estate sector remains one of the most difficult for casualty coverage. In 2024, the market faced significant challenges driven by rising claims costs, inflation and third-party litigation funding (TPLF), contributing to growing nuclear verdicts. › Primary General Liability rate increases ranged from 10% to 15%, and excess towers saw increases from mid-teens to 20%, with further rises expected in 2025, especially for complex risks or accounts with adverse claims development. Capacity in both primary and excess spaces remains a challenge, with carriers reducing limits based on exposure and jurisdiction. › Social inflation, driving higher legal fees, larger settlements and more frequent litigation, makes high-risk states like California, Texas and Florida tougher jurisdictions for competitive and affordable coverage. Carriers are adopting stricter underwriting guidelines and limiting exposure in high-risk areas, making coverage harder to obtain. › Coverage limitations and exclusions are also factors for many real estate accounts. Markets entertaining schedules with fewer than 1,000 units are applying sub-limits on assault and battery (A&B) and sexual abuse and molestation (SAM). Some carriers are excluding these coverages, particularly in states with high A&B risks, and are also excluding firearms. Human trafficking and habitability concerns are becoming more prominent in underwriting, regardless of location. › Due to the complex nature of real estate risks, market capacity challenges and nuclear verdicts, carriers are focusing more on claims history, emphasizing understanding open claims and extensive loss history. Comprehensive submissions, including thorough risk details, risk transfer language, vendor/tenant information, and security and property management protocols, are crucial for priority review.

Hospitality Price, terms and conditions vary widely depending on the venue. For primary coverage in 2025, the market is expected to resemble 2024, with significant challenges for liquor-driven businesses, particularly those with high liquor sales. A&B claims, combined with rising legal verdicts and settlements, have led many insurers to apply exclusions, limitations and sub-limits to reduce exposure. States with strict liquor liability laws, like South Carolina, remain difficult markets. The trend of businesses moving into the Excess & Surplus (E&S) market due to increased risks, including A&B and human trafficking, is likely to continue into 2025, driving up costs and creating more competition for limited capacity.

Professional Lines Trends have softened over the past few years, continuing into 2024 and 2025. Premiums are down year over year, and retentions are at historic lows. This trend is driven by good property investment performance, fewer losses in real estate management liability and an influx of new carriers entering the market. This has created an oversupply of limit capacity, particularly for real estate-oriented management liability products. Despite concerns about rising interest rates and potential property defaults, soft market conditions are expected to persist, especially for first-time buyers or insureds with general partnership exposure seeking private D&O policies.

Overall, the casualty insurance market in 2024 faced rising costs, increasing litigation and ongoing inflationary pressures, leading to tougher underwriting, rising premiums and stricter coverage conditions. Insurers are focused on managing exposures in high-risk sectors, particularly real estate and hospitality, while navigating the challenges posed by legal inflation and claims development. For 2025, insurers will likely continue to increase rates, particularly in high-exposure areas, and seek growth opportunities in the surplus lines market as they adapt to the changing landscape of risk and claims management.

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