2025 State of the market outlook and insights

Overview
While certain macroeconomic factors, including price inflation and high borrowing costs, stunted the industry’s growth in 2024, there are signs of positivity as we head into the new year.

Inflation is gradually progressing closer to the Federal Reserve’s two percent target and the cost of debt continues to improve. For the second time in two months, the Fed reduced the federal funds rate in November, amounting to a combined decrease of 75 basis points in 2024. We hope and expect this will result in a surge in new project activity throughout 2025.

Project profiles and industry dynamic continue to evolve. The life sciences construction boom, which was partly fueled by the COVID-19 pandemic, has slowed considerably due to rising material costs and an oversupply of lab/R&D space. In its place, the industry has seen a significant boom in data center construction and healthcare construction spending, as well as adaptive reuse of commercial buildings. In addition, the Infrastructure Investment and Jobs Act (IIJA) will continue to drive public transportation and infrastructure opportunities across the country for the foreseeable future. Similarly, the construction and modernization of water and wastewater treatment plants is expected to spike in the coming year.

While construction material costs are expected to continue to increase over time, supply chain disruption is slowly dissipating, causing availability to improve and lead times to shrink. That said, the availability of quality labor continues to be an industry-wide challenge. The resulting stress on the subcontractor community warrants close monitoring since subcontractor performance risk continues to increase.

With the construction insurance market, a healthy and growing construction industry helps offset any pricing inequity that is inherent in a particular line of coverage. While insurance coverages, like workers’ compensation and environment liability, are highly stable, other lines, like commercial property, builder’s risk, umbrella liability, and commercial auto, remain challenged.

Overview
Contractors across the nation build some of the most impressive structures that improve the quality of our lives, even in the face of diverse challenges they encounter daily. From financial management to skilled labor shortages, difficult contractual terms, and project delivery delays, contractors consistently demonstrate remarkable resilience and ingenuity as they manage their projects and investments.

Addressing these challenges requires contractors to innovate continuously, maintain rigorous project management practices, invest in talent, and stay agile in response to market and economic changes. Although the journey has been fraught with unprecedented obstacles, contractors are finding success and creating paths to harness opportunities.

In 2024, major headlines in construction and finance revolved around several key trends and challenges. One of the biggest developments was the rise of megaprojects, particularly those valued at over $1 billion. These projects are set to define the industry, with sectors like manufacturing, aviation, infrastructure, and clean energy leading the way. The Bipartisan Infrastructure Act and reshoring of supply chains is driving federal investment into these large-scale builds.

The shift towards renewable energy is another significant focus. Solar and wind projects, supported by government funding, are growing in number due to the Inflation Reduction Act. Investment in clean infrastructure is expected to overtake traditional coal power, making green energy construction a central industry pillar.

Additionally, inflation and associated interest rates are reshaping the financial landscape for construction. Financing has been more expensive, especially with increased reliance on bank loans, which are driving costs higher across projects serving to push starts and, in some cases, financial viability. We are hopeful that financing costs for construction projects will begin to reduce if the Fed continues to cut interest rates into 2025.

Moreover, labor shortages and supply chain disruptions continue to be major hurdles. Contractors are dealing with delays and cost increases, further complicating project timelines and budgets. The aftermath of the COVID-19 pandemic still lingers, impacting workforce availability and materials.

These themes — megaprojects, renewable energy, financial pressures, and operational challenges — are expected to dominate headlines into 2025, affecting the construction industry and the financial strategies to achieve success.

Overview
In 2024, all areas of the energy and marine industry saw immense opportunities driven by global energy needs and the energy transition. From increased M&A activity in the traditional energy sector to massive investments in renewables and momentous growth in digital infrastructure, heightened global demand for all sources of power and energy underpinned the industry’s sustained growth.

However, for another year, familiar headwinds also shaped the trajectory of the sector, namely geopolitical tensions, macroeconomic dynamics, supply chain challenges, and inclement weather. Additionally, with a new administration entering the White House in 2025, domestic energy policies will probably shift and impact different areas of the energy and marine industry in distinct ways. Despite these overarching challenges and areas of uncertainty, at the onset of 2025, the energy and marine industry is well positioned for continued success.

From a risk mitigation and coverage perspective, results in the insurance market are contingent on each project’s and operation’s distinct exposures and loss experience. Insurance market appetite can also vary greatly for different areas of the energy and marine ecosystem. When approaching the marketplace, buyers with differentiated, preferred risk profiles will achieve the best results while novel risks, loss history, and natural disaster exposures raise red flags from an underwriting perspective.

As you weigh your coverage options, refine risk mitigation strategies, and approach insurers, The Baldwin Group’s Energy and Marine Practice is ready to mobilize its experience in the sector and insurance market reach to help you protect your assets, operations, and workforce in the year that lies ahead.

Overview
The state of the manufacturing industry remained mixed in 2024, with the sector demonstrating continued strength against sustained headwinds. For another year, manufacturers navigated labor shortages, supply chain strains, consumer demand variability, challenging economic conditions, and regulatory uncertainty by embracing innovative technologies and government incentives.

Labor shortages driven by an aging population and shifting workforce preferences remain top of mind for manufacturing leaders. Because the demand for labor outpaces the availability of employees, workforce costs have continued to climb in 2024. Labor challenges also exacerbate supply chain issues and hinder effective supply chain management.

Though supply chains today are considerably more stable than a few years ago, global geopolitical tensions are a continuous source of unpredictability. Manufacturers have responded by exploring options like nearshoring and leveraging artificial intelligence (AI) solutions to optimize supply chain resilience.

Economic conditions also shaped the risk environment for manufacturers, with sustained inflationary pressures impacting revenue, profit margins, and consumer demand. Fortunately, inflation is trending toward the two percent mark. Additionally, the Federal Reserve’s decision to cut interest rates may also attract more investments in manufacturing.

In recent years, the manufacturing sector has benefitted from investment activity fueled by key acts, such as the Infrastructure and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act. It is important to note that a new presidential administration is likely to reshape fiscal and trade policies in ways that deeply impact manufacturers’ operations.

The manufacturing industry has made significant strides in the past years to recover from widespread challenges stemming from the COVID-19 pandemic. In 2025, the variables we detailed continue to create challenges and opportunities for the manufacturing industry. We remain optimistic that manufacturers will be able to answer the call by continually fine tuning their approach to risk mitigation and insurance.

Overview
The technology and innovation economy industry is unlike any other ecosystem, where knowledge and technological advancements fuel rapid growth. Early-stage companies and legacy players often team up in this space to bring products to market – think Microsoft and OpenAI or NVIDIA and ARM. Backed by venture capital, private equity, and other investment vehicles, this niche market shifts away from traditional pipelines and toward a more agile and adaptive approach, creating distinct risk management challenges along the way. But where is the industry headed in 2025? And how is the insurance market responding to these trends?

Tech IPOs slowed significantly in 2024, delaying fundraising and elevating startup valuations. This approach motivated the innovative economy to reimagine long-term strategic goals — but not without legal hurdles.

Overview
The banking industry has faced a dynamic and challenging risk environment in recent years shaped by increasing rates, inflation, and stress in the post-COVID commercial real estate market. This has resulted in rising uncertainty in credit demand, loan defaults, and deposit base stability. Additionally, technology is only becoming more sophisticated, with advancements in digital banking, artificial intelligence, and cybersecurity. These are some of the driving factors that caused the recent failures of several significant regional banks and other banks selling assets at fractions of their worth.

Now, more than ever, banks have had to adapt to strengthen their risk profile and better compete in today’s market.

Overview
The life science industry has seen its share of challenges in 2024. Going into 2025 companies in this space will need to navigate complicated issues spanning from regulatory challenges to questionable funding trends, technological advancements, and retaining talent. Innovative research and development are at the core of the industry. Artificial intelligence (AI) and machine learning continue to present opportunities to improve efficiency, time-to-market for new drugs and therapies, and ultimately attract new investment opportunities. We’re seeing an expansion of R&D in areas of consumer interest, such as weight loss, cell and gene therapies, mental health, and digital health. Aligning R&D efforts with these emerging classes to capitalize on market opportunity will be key.

Within the life sciences industry, clinical trials trends, popular sales models, and supply chain viability continue to shape the sector.

Overview
The nonprofit industry continues to rebound from the challenges resulting from the COVID-19 pandemic in addition to economic, technological, and workplace disruptions. Nonprofits face unique challenges from other industries, with organizations always searching for ways to expand non-dues revenue, grow and retain membership, and grapple with hybrid workforce issues, all while continually differentiating their value proposition to remain relevant. Moreover, artificial intelligence (AI) poses both risks and opportunities.

From a macroeconomic perspective, associations and other nonprofits are fighting for membership retention while finding ways to make their activities and events relevant and purposeful. Members today want more targeted value and less disruption of their time. Additionally, with a new administration in the White House in 2025, organizations will have to monitor changes in the regulatory environment.

In today’s risk environment, boards of directors and finance and risk committees are keenly focused on protecting directors and officers from associated risks. Meanwhile, claims activity remains persistent, notably with litigation from employees. As a result, managing employee-related exposures and purchasing employment practices liability (EPL) coverage remains a critical component of any nonprofit’s risk mitigation and insurance portfolio strategy.

Additionally, the ubiquity of technology in most business operations necessitates adequate cyber risk management, such as leveraging security tools, response procedures, and employee training. In fact, cyber insurers today have certain cybersecurity requirements that insureds must meet to obtain coverage. Fortunately, since more organizations have achieved greater resiliency to cyber-related losses with the implementation of cybersecurity tools and strategies, the cyber liability market has stabilized significantly in the past 18 months.

Overview
The hospitality industry has evolved and shifted significantly in recent years as it has recovered from pandemic-related disruptions, continually adapting to meet customers’ changing needs, expectations, and preferences. To meet pent up demand for hospitality and recreational services, casual, mid-range, and high-end establishments have all had to navigate operational challenges stemming from the economic environment, labor availability, and insurance market shifts.

Hospitality is not a monolith, and in 2025, sector-specific trends are shaping the different areas within the industry. Understanding these trends, along with potential risk and insurance considerations, is crucial for navigating the complexities of insurance in today’s dynamic market.

With experts embedded in all areas of the hospitality industry, we understand the challenges and opportunities different areas of the hospitality industry face, as well as the insurance market trends that may impact your business operations. As you look ahead to 2025, The Baldwin Group’s hospitality team is ready to deliver solutions that keep pace with a rapidly evolving risk environment.

Overview
The fine art insurance market in 2025 continues to evolve in response to global events, collectors’ preferences, and risk patterns. As we enter the new year, understanding the trends shaping the fine art insurance market can help collectors, investors, and insurers make informed decisions. Key developments include:

Increased digital integration
One major trend in fine art insurance is the rise of digital technology. With most transactions happening online, insurers are adopting advanced technologies to streamline the process. Digital platforms offer easier access to quotes, claims processing, and policy management. Smart apps can allow collectors to retrieve inventories and track values over time. Seasoned collectors will still rely on experienced advisors, but this shift will benefit clients.

Hybrid art forms
As the boundaries between artistic disciplines continue to blur, hybrid art forms will gain prominence in 2025. Artists will increasingly combine traditional techniques with modern technologies, resulting in innovative works that defy categorization. It is increasingly difficult to insure this art, since traditional policy forms categorize collections classes. This interconnectedness of different art forms and the possibilities that arise from their convergence is exciting, but as an industry, insurance has been slow to respond, and this affects both private and institutional collectors.

We will continue to see hybrid exhibitions offering immersive experiences that challenge traditional notions of how art can be presented and experienced, such as artist Refik Anadol’s works. This type of art creates distinct challenges from a risk and insurance perspective. Addressing liability issues is complex when guests are invited to climb up an invisible stair installation at an estate, or when a participant allows their neural mechanism to be accessed by an artist from an EEG to create multi-dimensional digital art.

Overview
The farm and equine insurance market today is being shaped by the prevalence of natural disasters, technological advancements, and macroeconomic changes. As we enter the new year, understanding the trends shaping farm and equine insurance can help you make informed coverage decisions that protect the legacy, lifestyle, and assets you have worked hard to build and acquire.