A Decisive Move Towards a Softening Market
Based on CIAB Commercial Property/Casualty Market Index, Q4 2025
In the final quarter of 2025, the commercial insurance market made its most definitive move toward soft conditions. Average premiums across all account sizes rose just 0.2%, down from 1.6% in Q3. Large account premiums fell 2.1%, marking the first negative movement since 2017. Medium accounts remained flat. Small accounts increased by 2.8%, likely because some regional carriers are still adjusting their appetite to determine what is deemed profitable and what is not. With more tools and technology in place, underwriters are evaluating risk differently than in prior cycles. The broad pattern points to a market where carrier competition and capacity continue to expand.
On the Horizon
Directors & Officers (D&O) and Cyber Liability continue to ease. These two lines represent the clearest and most actionable opportunities in the current market.
D&O posted its eighth consecutive quarter of decreases at 3.8%. Supported by strong 2024 loss ratios of 49% and increased capacity, this has created favorable conditions for buyers.
Cyber fell 3.3% for the seventh consecutive quarter as underwriting models, controls, and exposure understanding continue to evolve.
Commercial Auto: Persistent Severity
While most of the market softens, commercial auto stands alone as the most persistent and severe challenge in commercial insurance today. The Q4 marked the 58th consecutive quarterly increase at 6.6%. The continued increases are due to several key factors:
- Rising claim severity and long‑duration claims that push total loss costs higher.
- Nuclear verdicts that exceed primary limits and inflate overall loss outcomes.
- Escalating loss costs, with average claim costs doubling from 2015 to 2024 and national tort costs growing about 10 percent per year
- Higher overall frequency of auto‑related claims
Umbrella: Downstream Impact
As commercial auto severity escalates, umbrella coverage absorbs much of the impact. Larger auto losses continue to reach excess layers, keeping pressure on umbrella rates and capacity. Even as most lines soften, umbrella increased 4.7% and remains under stress until auto severity trends stabilize.
Yes/And: The M3 Lens
The softening market provides room to recalibrate, yet not all lines are moving in the same direction. Relief in D&O, Cyber, and parts of property create space to strengthen programs; while rising severity in auto and umbrella underscores that risk adequacy matters more than short term pricing trends.
Now is the moment to reassess whether your program reflects today’s realities:
- Leverage decreases in D&O and Cyber. Multiple quarters of improved loss performance and increased capacity signal a favorable window to revisit limits and structure.
- Reevaluate commercial auto strategy. Severity trends and long-running cost pressures point to the need for a coordinated risk approach that integrates safety practices, analytics, and coverage design.
- Align umbrella limits with actual exposure. Auto severity continues to flow into higher layers, making umbrella structure a critical part of overall protection.
Connect with your M3 Client Executive to review the programs you have in place and identify where your coverage aligns with today’s market, as well as where targeted adjustments may help build long-term resilience.
