2025 Q3 State of the Property Insurance Market

I hope everyone enjoyed their summer, fired up the BBQ, had a nice vacation or two and is ready to embark on the second half of what has been a wild ride of a year from an insurance perspective.

As we pass the midpoint of 2025, the property insurance landscape continues to shift, with rate decreases and the softening of terms and conditions. Clients are back to buying assets and enhancing their programs; in some cases, premium levels are rising, with larger exposures and better terms and conditions — but by and large, customers are seeing welcome relief.

The first half of the year brought a wave of rate decreases and expanded capacity to the marketplace. Many carriers and new capacity providers are still commenting on rates being adequate or above technical pricing, given how much uplift the industry got through 2023. Carriers acknowledge that if rates keep chipping away, their portfolios will be less profitable relative to modeled risks and actuarial data, but it doesn't mean they still won't be looking for avenues to grow.

How We Got Here

The big question on everyone's mind is what the remainder of 2025 might hold. With ongoing weather volatility, geopolitical uncertainties and a resilient reinsurance environment, insureds should prepare for both opportunities and potential challenges ahead.

As we know, 2023 was characterized by extraordinary rate hikes, tightening capacity and aggressive underwriting discipline prompted by significant CAT losses and a need for carriers to restore profitability after losing money on their underwriting for several straight years.

2024 marked a turning point, with rates beginning to soften, capacity coming back in abundance and competition heating up. The rate deceleration grew as the year went on, and the carrier thought process was to write as much business as possible before the market softened further, with insured's increasing capacity and reducing deductibles offsetting premium reductions.

Through the first half of 2025, that softening trend and carrier mentality to write more premium has persisted and deepened in many markets, with some specific areas experiencing rate reductions exceeding 25%. Carriers, flush with capital and supported by reinsurers eager to deploy capacity, are actively competing for business and offering clients multiple options, larger limits and more favorable terms.

The most concerning thing for underwriters with boots on the ground and at the product-line-leader level is the softening of terms and conditions. Many markets are wondering if we're reaching a potential floor in rate and terms as we wrap up 2025 and head into 2026.

What's Next for the Property Insurance Market

A lot can change quickly in the catastrophe Excess and Surplus (CAT E&S) property marketplace. For the rest of 2025, the market appears poised to remain favorable for insureds, and the expectation is that things will remain status quo, barring any major CAT event. Carrier commentary suggests that rate decreases will likely remain constant — but heading into 2026, we expect rate reductions to lessen, given that most carriers were surprised by how quickly the market drove itself down in the first two quarters of 2025.

Barring a major CAT event, the next six to 18 months present an excellent window for clients to lock in long-term relationships and optimize their coverage. Most clients continue to remain loyal to incumbent markets that treat them fairly, but many also want to engage new partners to further bifurcate their programs for when market conditions do eventually swing back the other way.

Just about every renewal program continues to be oversubscribed with capacity, which gives insureds lots of options. Universally, clients are enjoying the rate relief and the competition they're seeing on the carrier side, and many insureds are using some of the premium savings to buy lower deductibles, enhance coverage limits and get better terms and conditions in their respective programs. Clients that took on larger retentions in the past are also looking at captives and parametric coverage as a way to hedge the eventual market turn; we're seeing a lot of creativity come back into the market.

What's unique about our current trading environment is that volatility remains a very real possibility. Just two years ago, we were in the midst of quite possibly the hardest market anyone had ever seen, and now carriers are expanding lines and chomping at the bit to get on every deal. The softening of terms and conditions and carriers taking on larger lines are the main culprits for the former, and while rate adequacy appears to be healthy right now, CAT activity — especially late-season storms or unanticipated weather events — could tighten capacity and cause a temporary reversal of the current trend.

Weather Volatility and the Property Insurance Market

Despite the generally positive market trajectory, recent weather disasters serve as stark reminders of the ongoing risk landscape. Notably, we had the California wildfires to start the year and, most recently, severe flooding in Texas.

The fires in California have insured loss estimates currently in the $25B to $45B range and are predicted to go up. The Texas floods are sitting around $20B in economic losses, but insured loss estimates will be significantly lower due to the low take-up rate of flood insurance. All told, as we crossed the midway point in the year, the US property insurance market has seen close to $60B of insured losses between the Los Angeles fires, convective storms, flooding and other weather-related events.¹

To be at $60B before the heart of hurricane season and the traditional wildfire season in the western US is significant. Carriers have positioned themselves to be able to absorb years with well over $125B in global insured losses, but as rates continue to decline and attritional loss activity ticks up, the threshold carriers can absorb will drop and decrease profitability.

Carriers should continue to factor potential future weather volatility into their planning, ensuring sufficient capacity and correct deductible levels to withstand the next event, as events continue to increase in both frequency and severity.

Navigating a Shifting Property Insurance Market

The persistent threat of catastrophic weather events and geopolitical uncertainties mean that market conditions could shift quickly, and that shift is when long-term partnerships matter most. Insureds that chase the cheapest option every year are doing what they feel is best for their businesses, but they should consider long-term stability in an insurance program.

Insureds should remain vigilant, working closely with their brokers to monitor evolving risks and market signals. Building strong, transparent relationships with carriers and maintaining flexible, well-structured programs will be key to navigating the remainder of 2025.

Current Market Conditions Span Business Classes

Normally I would do a deeper dive of rate reductions by geography and class of business, but one of the things that makes this market unique is that the reductions and enhanced coverage are universal.

The only differentiator in the market right now is that clients whose rates went up significantly because of attritional losses and CAT losses in years past are seeing larger reductions. Why? Because their rates have a lot further to go down to get back to market levels. We're seeing rates down 20% to 27.5% consistently for these clients.

Clients with a very favorable loss experience and rates that were always well below market are still seeing reductions, but many of them are in the 10% to 18% range. All things considered, the overall market average seems to be 12.5% to 20% deal by deal.

Even clients who are coming off large claims on their expiring programs are finding themselves with rates anywhere from flat to coming down 5%. Carrier competition is helping these customers because new markets that haven't paid the claims but like the risk and want the premium lift are happy to compete for it, which makes it harder for incumbent carriers to position themselves as favorably.

Some Quick Highlights

Named Windstorm/Tier 1

While concerns about insurability in Florida and other coastal areas lingered through 2023 and 2024, recent data indicates that increased capacity and larger limits are now more accessible. Windstorm rates in Tier 1 markets have decreased by 15%-20%, and clients are trading rate relief for lower deductibles and expanded limits. Outside Florida and Louisiana, retention levels are lessening to around 2%-3%, with Texas named windstorm (NWS) deductibles now in the 2%-5% range. Underwriters remain disciplined, but the overall appetite for risk has improved significantly.

Valuations/Insurance to Value

Accurate property valuation remains critical and isn't something clients should abandon. Part of the issues with 2023 was that most customers had the double whammy of large valuation increases and large rate increases. Now that clients have gotten back on track, my suggestion is to continue to make inflation-driven valuation increases and maintain blanket limits. With increased capacity and more competitive carriers, there's a trend toward more flexible valuation approaches, but underwriters will still treat clients who don't neglect this much more favorably.

Wood Frame Construction

If you think the property insurance market decelerated quickly, take a look at wood frame construction rates for new ground-up construction. Two years ago, a wood frame build in the $50M to $100M range would have easily run at a rate of $0.675 to $0.75 annually, provided it was in a low-crime area. Today, that same project is hovering around $0.40 annually, with some projects going into the high $0.30s. This market segment is quickly becoming a race to the bottom. Construction starts have decreased as loan interest levels remain up, so now every managing general agent (MGA) and carrier is chasing the projects that are out there with lower rates and more relaxed security requirements.

At RPS, we're committed to staying ahead of these trends, managing client expectations and fostering carrier partnerships that prioritize stability and trust. As the year progresses, we'll continue to provide insights and guidance to help you make informed decisions.

I hope you have a strong finish to the year and enjoy some beautiful late summer and fall weather before winter sets in. I, for one, am certainly looking forward to the return of football on TV!