Spring is officially here, and I hope this market update finds you well. As I write this, I trust we all made it through the first quarter of the year; it was quite the whirlwind with one of the quickest shifts in insurance rate trajectory in the last six years.

The Path of a Long-Term Hard Market Cycle

In the five years leading up to 2024, rates were much like the consistent weather in California, with the market in the throes of a long-term hard market cycle that we have discussed ad nauseam in past market updates.

The cycle culminated in 2023, with consistent double-digit rate increases, a scarcity of market capacity in the catastrophe (CAT) world, more restrictive terms and conditions, and a major focus on insurance-to-value metrics which required insureds to right-size their values and further increased premium spends for buyers. Most would agree that 2023 was one of the hardest markets anyone had ever seen, and it wasn't that easy for carriers either, as they had to adjust their reinsurance programs and make unexpected changes to their CAT aggregates. From the perspective of the stat trackers and seasoned insurance professionals, this hard market cycle was one of the longest ever recorded by the Excess and Surplus (E&S) Property arena.

From the carriers' perspective, this hard market cycle was needed to help get carrier profitability and underwriting terms and conditions back to healthy levels to allow for long-term profits even during insured loss years that hovered or exceeded $100B in losses. The hard market we all experienced came on the tail of years of rate decline that put carriers in a bit of a tailspin that yielded a lack of underwriting profitability and high levels of attritional and CAT loss activity. The result of 2023 was record profits for just about every major carrier due to a very benign CAT loss year.

2024 also yielded very favorable results for just about every major property insurance carrier in the E&S lines arena, and now that the industry has corrected itself, the pendulum has undoubtedly swung back to the insurance buyers' side.

Throughout 2024, brokers saw improved conditions, and clients were afforded rate relief at what carriers would imply to be manageable levels. It was a year of healthy premium growth due to clients building, buying and improving terms and conditions on their insurance programs. Premium growth was healthy for all, and that growth even came on the back end of average reductions throughout 2024 in the 7.5% to 12.5% down range. Most importantly, buyers saw more options that spurred the start of increased carrier competition. As the year concluded, rates were down an average of 10% to 15%, and the 2025 market seemed poised to continue to offer more options and more capacity to buyers.

2025: Out of the Gate at Lightning Speed

As January 2025 hit, so did historic and devastating wildfires in California that significantly impacted the greater Los Angeles area. As the months unfold, it's become clear that despite the tragic nature of the event, the rate environment in 2025 hasn't been deterred and has only picked up speed.

As I write this market update, GallagherRe has estimated the marketplace will see a $40B loss from these fires, a very large number given that we're not yet in peak convective storm season or the Atlantic Hurricane season. Underwriters at Lloyds and domestically have suggested that this large of a loss at the start the year could make current market conditions fragile, and an active CAT season to finish the year could cause another shift in the level of rate change.

It seem like carriers want to continue to capitalize on rate adequacy that still remains before conditions deteriorate further. With all the new capacity in the market, carriers are competing to capture as much market share as they can to meet their own growth goals.

2025 has come out of the gate like a prize horse at the Kentucky Derby, yielding average rate decreases in the 12.5% to 22.5%+ range. However, premium declines remain more resilient as many buyers use the favorable environment to enhance their coverage. The influx of capital into the insurance market and the stability reinsurers offer to carriers have fueled a buyers' market. If you asked most brokers, the hardest part about the market right now is the number of mouths to feed and trying to find a happy balance between new capacity and the incumbent capacity that carried buyers through more challenging renewal cycles.

The clients that want the cheapest insurance in the market can easily find it by kicking past partnerships to the curb, looking for more favorable deductibles that are well below market average and going with less tenured or flash-in-the-pan startup capacity. It's a bit of a "world is your oyster" market, and we're finding many of our long-term clients focusing on solidifying their long-standing carrier partnerships as opposed to taking the hot new product. This market has something for everyone, but if insurance program stability is your flavor of the day, you're likely sacrificing a bit of a reduction to remain with a healthy amount of incumbent capacity and some new capacity where it makes sense to forge new partnerships.

As brokers, we're constantly reminded that the customer is always right, and it's our job to present all the options clients need to see to make the most educated decision possible. Part of that customer education should involve a bit of a history lesson for some buyers so they don't end up where they were in 2023, because we all know how quickly the market can turn.

Looking Ahead at the 2025 Property Market

Lots of other factors could influence the 2025 Property market, and right now, tariffs seem to be on everyone's mind. To avoid diving into a global politics discussion, we'll focus on key areas where results are more measurable and calculated. At Risk Placement Services, our wholesale Property insurance team remains very focused on staying well ahead of a quickly changing market and managing client expectations as we work with you on both new and renewal business. We're also focused on straightening our carrier partnerships and making sure carriers understand that a partnership is a good faith handshake and a two-way street.

Below is what we have been seeing in some key geographies and asset classes and, like the broader market, the news is good. If your broker is giving you bad news, they either need a new wholesale trading partner or a new retail broker, or your claims experience hasn't yielded an underlying profit and you should ask yourself your own set of partnership questions.

Named Windstorm/Tier 1 Gulf Coast Business

In 2023, there was talk that Florida was no longer insurable. While the condo and personal lines market still faces some challenges, Forida and Tier 1 business in general are seeing more access to capacity, the ability to secure larger limits and new managing general gents (MGAs) targeting growth in what used to be a place where additional capacity was hard to come by.

The Tier 1 Named Windstorm (NWS) market is trending down 15% to 20% at a minimum, and clients are also trading rate relief for lower deductibles and larger limits. This situation is helping keep premium growth at more manageable levels, while clients still see significant reductions.

We've seen a return to 2% and 3% retentions outside of Florida and Louisiana. Texas NWS deductibles are now in the 2% to 5% range depending on the type of risk and whether the client wants to trade back rate for lower retentions. Either way, the options are there.

Underwriters are still trying to maintain discipline in terms of deployed line size, but all things considered, there's a sense that the modeled rates support writing more of this business, despite substantial hurricane activity in the last several Atlantic hurricane seasons.

Valuation/Replacement Cost/Insurance to Value

You couldn't attend an insurance-related meeting in 2022 and 2023 without someone talking about property valuations and replacement cost, how critical it was to getting deductible levels right and how much proper values correlated with rate and premium adequacy by risk. Clients dealt with the pain of significant rate increases in 2023 on top of valuation adjustments that were in the 10% to 15% up category for most risks.

As we start 2025, carriers are very relaxed about the subject, which I believe to be the result of clients making material adjustments in past renewal cycles. We're seeing many programs for clients that continue to make inflationary-type adjustments revert back to blanket limits from margin clauses or scheduled programs.

With more capacity and competition in the market, there are more options to work with carriers that are more lenient, and we're finding that those that don't want to offer meaningful margin clauses and blanket limits are far less likely to be uses on insurance programs. Obviously, there are still those with very low insurance to value (ITV) and replacement cost metrics that still need to make adjustments. When they don't, carriers are still pushing back or walking away from risks.

As a buyer, you would be prudent to keep up with inflation, so you don't get behind on this part of your risk profile. Those with the best and most realistic replacement cost metrics are seeing the most competition; the more competition you have, the better coverage and rate reduction you're likely to receive.

Wood Frame Construction

In 2023, capacity for wood frame construction was constrained, and only a small handful of lead markets were available to put together wood frame construction programs. The market started getting competitive towards the end of 2024, and that trend's continuing as we kick off 2025. While new construction starts slowed in 2024 due to interest rates and broader economic factors, we've already seen many of our construction clients load up their pipelines for projects in 2025.

As we start this year, almost every carrier and MGA has double the capacity they had previously, and many of them are happy to lead projects. Rates for wood frame construction used to start in the mid-60s or 70s, but have quickly plummeted to the mid-40 and 50s for non-CAT business.

A plethora of facilities are emerging in the space with automatic program subscription, and wood frame construction seems to be another space in the E&S market where clients will have access to much more capacity than they need. Of course, there are still a few outliers, and we still see high-crime score, brush zone exposed and manufactured housing remain challenging.

California Earthquake

The California earthquake (EQ) space saw uplift just like everyone else in 2023, and the really large programs where clients were buying north of $250M of capacity certainly ran into some capacity issues. But unlike the broader insurance market, the California EQ market never really experienced the same capacity or rate increase issues that culminated in 2023.

California EQ continues to be competitive, and clients have access to the capacity they need — some are back to buying increased limits. Rates are down an average of 12% to 17.5% to start the year, which is the lower end of the industry average.

However, we've seen many incumbents not want to lose long-term difference in conditions (DIC) clients, so when forced with market competition, many of the traditional DIC MGAs will quickly push rates down in excess of 20% to retain business or fend off All Risk Including EQ placements, which are becoming more common. The All Risk Including layers and structures are anticipated to grow because All Risk markets will happily use the EQ premium to offset their lower All Other Perils (AOP) rates.

Multi-Family

As always, this asset class is a challenging, but the market seems more bullish on it than in previous years. Many clients are seeing rate decreases in the 15% to 20%+ range, as a result of how heavy increases were in this asset class relative to others. The clients with heavily bifurcated programs, good loss experience and average to above-average valuations are being rewarded in 2025 with robust rate decreases, better deductibles, access to more limits if desired and set rate structures to help with additions and deletions through their policy term.

We may have seen many clients combine various placements with smaller middle-market carriers into larger layered and shared programs. Carriers that are looking for an influx of premium growth see this asset class a bit like strike gold, where they can quickly grow their book with quota share primary positions in this space.

Clients with brush zone exposed and loss-prone schedules will still find the market a bit challenging, but if they are willing to take the right deductibles, a lot of carriers will compete for their business this year.

It's easier to separate this segment of the market into the following categories:

$1B+

  • Good loss experience, bifurcated program, good spread of risk and properties relatively newer — averaging 20% to 25% down
  • Loss adverse with tougher properties and less geographic dispersion — 5% to 10% down depending on loss If losses are still yielding a lack of underwriting profit year-over-year, then these clients could see increases
  • Many clients in this space are trading down plus aggregate deductibles and lowering CAT deductibles, which is lessening their reductions and in some cases increasing their The clients doing this are less risk-averse and are trading away deductibles they were not comfortable with that were forced upon them in 2023.

$500M to $1B

In both categories, the results are similar to $1B+ schedules, but there's less market competition given that many clients in this total insurance value (TIV) band opt for lower deductibles, so the $250k minimum AOP markets are typically out of the picture.

$250M to $500M

  • This band is where the MGA and program worlds collide with the E&S We have a lot of business in this space, and some of these clients run towards property management programs so they can take advantage of larger economies of scale. Others want their own program because they don't want to be adversely impacted by losses that have no relation to their exposure.
  • We continue to see a lot of consolidation in this space as standard markets continue to be less comfortable with schedules that have grown to these TIV levels and no longer write When that happens, we're creating E&S programs for clients for the first time, which usually means a rate adjustment that will likely be an increase over what they were previously paying, with higher retentions that are more common in the E&S arena. Clients already in E&S programs are seeing rate reductions in the 12.5% to 15% range for those that are performing well and have positive risk characteristics. If they're more loss adverse, they could see increases in rate and retention so that underwriters get the right premium level they need to absorb the annual expected loss averages.
  • For the most part, E&S carriers are starting to compete with standard single carrier risks in just above every category except deductibles, so when middle-market clients can take larger retentions, E&S programs will provide more long-term stability and the ability to add assets through acquisition that standard markets deem Clients are looking for one solution versus multiple policies now that rates are coming down and pricing is much more appealing.

Less than $250M

Many of these schedules struggle in the E&S world, but MGAs are writing them left and right and are aggressively looking to grow. We've seen many clients who own 2 to 15 properties place their schedules with various MGAs to meet MGA guidelines around building value limits, location limits, geography restrictions, etc.

Wildfire

This category is too soon to tell. The initial outlook for 2025 was that every E&S property segment would be more competitive compared to 2024, but the wildfires in Los Angeles have caused a bit of a pause in this space. The LA wildfires are a personal lines issue more than a commercial issue, but rate reductions are well below market average for brush zone-exposed clients and capacity is still a commodity. Standard markets still want to trim their exposure, and E&S carriers are more flexible, so this is a major area of premium growth for the E&S markets despite the heavy rates they're still using.

At the start of 2025 I would have told you that I didn't expect the market to go crazy this year, but I have quickly changed my tune. Right now, carriers are running full speed ahead. The pace of these reductions will likely halt as we get towards the start of Atlantic hurricane season and into Q3 of 2025. Like every year, all eyes will be on what impact the hurricane market will have on the remainder of 2025 and into 2026.

It's important to remember that, for the most part, carriers only had two years of profit, and those two years aren't something the carriers want to give back so quickly. With rate levels where they are and with the deductible corrections the E&S market made, the threshold for market change that everyone is talking about has moved the needle from $100B to likely north of $150B in insured catastrophe losses. If attritional rates tick up as rates decline and deductibles get better for insureds, the carrier results could be quickly impacted, and 2026 might look a bit like hitting the brakes before the train derails. Time will tell, but for now, the buyers' market is here to stay!

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