The commercial property market is showing signs of stabilization, and buyers with favorable risk profiles will see rate decreases or low-single-digit increases this year, according to USI Insurance Services’ 2025 Commercial Property & Casualty Market Outlook.

Accounts with unfavorable loss experience will likely see rates increase by 5-15 percent in the first half of 2025 compared to 10-20 percent increases in the second half of 2024.

USI also predicts ample capacity will be available following favorable underwriting results for insurers and reinsurers.

“With natural catastrophe insured losses around $135 billion globally in 2024, according to Swiss Re, policyholders can expect insurers to remain vigilant in risk selection and deductible levels, although some rate relief is expected for favorable risk profiles,” the report said. However, USI noted that risks such as senior housing, frame apartments, vacant properties, and those in foreclosure or receivership remain difficult to place, while exposure to wildfires and severe convective storms continues to impact available capacity.

Lithium batteries from electric vehicles (EVs) are creating new hazards, USI said. Lithium battery fires generate intense heat and can be difficult to extinguish, risking uncontrolled spread that can cause severe damage to property. In addition, EVs often weigh 30 percent more than gas-powered internal combustion vehicles due to their lithium battery weight, which leads to increased risk of parking structures collapsing.

Interest in alternative risk transfer continues to be in high demand, USI said, and utilization of parametric insurance products is expected to increase in 2025.

Other highlights from USI’s report include:

Commercial auto: Smaller fleets (fewer than 200 vehicles) with good loss histories are expected to see rates that are flat to around a 5 percent increase. Larger fleets and those with poor loss histories can expect rate increases up to 30 percent.

Workers comp: Workers compensation rates and premiums are expected to decline overall, but at a much slower pace than prior years. USI said that workers comp remains profitable for most insurers that write on both a guaranteed-cost and loss-sensitive basis, thanks to declining claims frequency and moderate loss severity trends. The average rate in most states has decreased YOY, and the supply of capacity remains high. This has resulted in premium reductions in most cases, despite increasing payrolls.

Umbrella/Excess: Rates for middle-market buyers are expected to be flat to up 10 percent, and larger buyers can expect flat to up 15 percent, depending on prior loss history and class of business.

Directors and Officers Liability (D&O): Public company D&O rates are expected to be flat to down 5 percent in the first half of 2025, while private company and not-for-profit rates will be flat to down 7.5 percent. USI noted an increase in securities class action litigation and deceptive claims related to artificial intelligence.

Employment Practices Liability (EPL): Rates are expected to range from down 5 percent to up 10 percent. USI cited increased “privacy exposures from more genetic and biometric data collection, and a charged atmosphere around political and ideological affiliation.”

Professional Liability/Errors and Omissions (E&O): Rates are expected to range from down 5 percent to up 10 percent. USI noted that “overreliance on AI could result in erroneous counsel given to clients and other alleged wrongful acts like copyright infringement or invasion of privacy.”

Environmental: The environmental insurance market is stable, with new entrant carriers potentially bringing creative coverage solutions in 2025. As regulatory scrutiny grows, securing coverage for per- and polyfluoroalkyl substances (PFAS), or “forever chemicals,” has become more difficult. Environmental regulations worldwide are tightening, which is driving demand for pollution liability insurance and coverage for emerging risks in areas like construction and M&A.