Litigation Pressures Drive Casualty Rate Hikes Despite Property Market Relief
TAMPA, Fla. — July 30, 2025 — The Baldwin Group’s Q2 2025 Market Pulse Report reveals a stark contrast in the commercial insurance landscape, with property markets stabilizing while casualty lines face persistent upward pricing pressure due to escalating litigation risks. The report highlights a bifurcated market where improved reinsurance dynamics and increased capacity are fostering relief in property insurance, but casualty lines, including general liability and commercial auto, are grappling with volatility driven by legal system challenges.
Property Market Gains Stability
The commercial property market is showing signs of stabilization, a welcome shift from the volatility of recent years. According to The Baldwin Group, commercial property pricing remained flat in Q2 2025, a significant drop from the 8.3% increase observed in Q2 2024. This cooling is attributed to favorable reinsurance renewals on July 1, expanded capacity from managing general agencies (MGAs), and growth in the excess and surplus (E&S) market. These factors have provided greater flexibility for accounts previously hit by catastrophe (CAT) risk pricing spikes. Notably, larger CAT-exposed properties are now seeing risk-adjusted rate decreases compared to last year.
The $45 billion in insured losses from January’s Los Angeles wildfires tested market resilience early in 2025, yet the property sector absorbed the impact. Clients implementing proactive measures—such as flood barriers, retrofitted roofing, sensor technology, and updated valuations—are reaping benefits in the form of improved pricing, broader coverage, and increased underwriting confidence. “Organizations that invest in resilience strategies are securing stronger terms in today’s market,” said Matt Kashdin, National Director of Client Engagement at The Baldwin Group.
Casualty Lines Under Pressure
In contrast, casualty lines are facing sustained pricing increases driven by litigation-related challenges. The Baldwin Group reports that general liability premiums rose by 5.3% and commercial auto by 6.5% in Q2 2025. Umbrella and excess liability lines saw even steeper hikes, with premiums climbing 9.3%. The primary drivers of these increases are legal system abuse, large jury verdicts, and the growing influence of third-party litigation funding, which is expected to reach $31 billion by 2028, according to AM Best.
Social inflation—rising claims costs due to increased litigation, larger jury awards, and expanded policy interpretations—continues to strain the casualty market. Insurers are responding with stricter underwriting guidelines and calls for structural legal reforms, citing these costs as a hidden tax on policyholders and the broader economy. “The casualty market remains reactive and unsettled,” Kashdin noted. “Businesses must act decisively to navigate these pressures.”
Strategic Recommendations for Businesses
With hurricane season underway and midyear reinsurance renewals approaching, The Baldwin Group emphasizes the need for proactive risk management. Businesses are urged to reassess policy limits, tighten program structures, and leverage real-time risk data to strengthen their risk profiles. “Nimbleness and responsiveness will define success,” Kashdin added. “Partnering with risk advisors to adopt forward-looking strategies is critical for securing optimal pricing and coverage at renewal.”
The report also highlights opportunities in other lines. Cyber insurance remains competitive despite rising ransomware and supply chain risks, with insurers refining prevention-focused coverage. Management liability lines, such as directors and officers (D&O) and employment practices liability (EPLI), are seeing selective pricing softening for financially sound companies, though underwriting scrutiny is increasing amid regulatory pressures.
A Call to Action
As the commercial insurance market navigates this divided landscape, The Baldwin Group underscores the importance of adaptability. Organizations that prioritize proactive mitigation and data-driven risk profiles will be best positioned to capitalize on the stabilizing property market while managing the challenges in casualty lines. For more insights, visit www.baldwin.com.
Sources: The Baldwin Group Q2 2025 Market Pulse Report, AM Best