2026 Commercial Risk State of the market

The commercial P&C market enters the second half of 2026 in measured transition, with polycrisis giving way to structural fragmentation across industries, geographies, and business models. Climate events amplify supply chain and business interruption exposures, geopolitical conflict reshapes risk, AI accelerates innovation and threat sophistication, and social inflation drives loss severity and affordability pressures.

Summary

The result is a market defined less by traditional cycles and isolated risks and more by interconnected exposures, where underwriting outcomes increasingly hinge on risk quality, governance, and complexity. As fragmentation grows, so does demand for specialized expertise, tailored advice, and customized solutions.

Natural catastrophe activity remains a dominant driver of property losses and business interruption exposure, while geopolitical conflict, trade fragmentation, and supply chain realignment contribute to uncertainty and inflationary pressure. AI is creating new governance, liability, workforce, and cyber exposures as social inflation and litigation funding continue weighing on casualty performance.

Risk management has become a strategic priority as organizations seek measurable returns from investments in safety, workforce resilience, cybersecurity, and controls. Strong governance, controls, valuations, and loss performance differentiate risks, with preferred accounts benefiting from competitive conditions while more challenged exposures face heightened scrutiny, higher retentions, and selective deployment.

The market is responding through greater specialization, analytics, and continuous engagement. AI-enabled underwriting, parametric solutions, mitigation incentives, and integrated risk financing strategies are changing how commercial risk is financed and managed. Excess and surplus (E&S) expansion, managing general agent (MGA) growth, and bespoke program structures continue expanding access to specialty capacity, underscoring the importance of program design, contractual risk transfer, and claims coordination.

As exposures become more complex and interconnected, commercial buyers need advisors who can align risk management, insurance strategy, and business objectives. The Baldwin Group brings the sector expertise, analytics, and tailored program design to help organizations navigate uncertainty and capitalize on opportunity.

Commercial Property

A disciplined market rewards stronger, more resilient properties

Overview

Commercial property pricing continues softening into the second half of 2026, with Q1 marking the fourth consecutive quarter of rate decreases and the steepest decline to date. Competition remains strongest for well-maintained, loss-free properties, while CAT-exposed, wildfire-prone, and loss-affected risks continue facing greater scrutiny. Shared and layered placements are seeing the largest reductions as buyers leverage abundant capacity to restore limits, broaden terms, and revisit deductibles that were cost-prohibitive during the hard market.

Insurers remain focused on profitability despite improving market conditions. Reinsurance improvements and expanded capital continue supporting appetite, though underwriters remain disciplined about CAT exposure, valuations, and replacement-cost assumptions, particularly in regions vulnerable to severe weather and wildfire activity.

Loss and resilience snapshot

Sources: Verisk,¹ Nationwide²

Key watchpoints

Trade, geopolitical, and valuation uncertainty

Geopolitical conflict, trade fragmentation, and tariff uncertainty are complicating replacement-cost forecasting. Middle East tensions and supply chain realignment are colliding with volatile energy, labor, and material costs, reshaping rebuild economics even as broader inflationary pressures persist. Accurate ITV documentation and current valuations remain critical, with underwriters maintaining close scrutiny of replacement-cost assumptions, margin clauses, and occurrence-limit endorsements.

Risk readiness beyond the building

Deferred maintenance remains a leading driver of preventable property losses, but underwriting attention is expanding beyond physical assets. Business continuity planning, workforce preparedness, and recovery capabilities are becoming more important as organizations navigate severe weather, supply chain disruption, and dependencies that can complicate recovery.

Better risks, better outcomes

More sophisticated underwriting is placing greater emphasis on property-specific risk characteristics, with roof age, system upgrades, defensible space, water mitigation, and documented maintenance increasingly influencing pricing, coverage availability, and deductible flexibility. Organizations that invest in mitigation continue benefiting from stronger competition and broader coverage options.

The market is also shifting from reactive claims response toward proactive loss prevention. Insurers are increasingly leveraging analytics, engineering expertise, and risk management support to reduce preventable losses. As a result, prevention-oriented underwriting continues shaping how property risk is evaluated, priced, and serviced.

Source: Nationwide³

Looking ahead

Property conditions are expected to remain favorable for high-quality risks through year-end, supported by abundant reinsurance capital, alternative capital inflows, and continued insurance-linked securities (ILS) and CAT bond market depth. However, the sustainability of softening remains dependent on second-half catastrophe activity, particularly Atlantic hurricane season outcomes, late-season wildfire risk, and continued SCS volatility. While a single event is unlikely to shift market conditions materially, multiple large losses could quickly alter underwriting sentiment and capital deployment.

Ongoing conflict in the Middle East remains a key watchpoint as volatility across energy, shipping, and supply chains continues influencing reconstruction costs and project timelines. Organizations should review business interruption and supplier-dependency exposures, particularly where operations rely on global suppliers or specialized equipment. Parametric solutions, captives, and strong submission quality remain important differentiators as insurers balance growth opportunities with underwriting discipline.

Recommendations

A strong property placement starts with data integrity and visible proof of prevention. The Baldwin Group partners with your business to help enhance market standing through tailored guidance, data-driven insight, and insurer-ready preparation:

• Insurance-to-value: Validate replacement costs regularly, using current valuations, contractor input, and updated rebuild assumptions.
• Mitigation investments: Maintain records of resilience investments and preventive maintenance to help improve underwriting outcomes.
• Program optimization: Evaluate limits, deductibles, and alternative structures to align protection with exposure.
• Submission quality: Differentiate your risk with complete property data, inspections, maintenance records, and loss-control documentation.
• Business continuity planning: Strengthen workforce support, supplier continuity, and recovery strategies to better minimize disruption after an event.
• Coverage adequacy: Review business interruption, contingent business interruption, and supplier-dependent exposures against evolving catastrophe, supply chain, and geopolitical risks.
• Market strategy: Use competitive market conditions to improve program flexibility and long-term stability while balancing pricing opportunities against insurer commitment and longevity.
• Risk financing strategy: Integrate insurance, mitigation investments, and capital planning to support business objectives amid ongoing economic and geopolitical uncertainty.
• Secondary risk characteristics: Collect secondary COPE information at the portfolio level, including roof, window, and siding details, to drive stronger outcomes at specific catastrophe-prone locations.

Casualty Markets

Structural litigation pressure meets a new era of liability

Overview

The casualty market is moving on a fundamentally different trajectory than property. Structural pressure from social inflation, litigation funding, mass tort activity, nuclear verdicts, and emerging liabilities is making traditional underwriting assumptions less reliable as legal theories expand, claim severity climbs, and tail development lengthens.

The result is a market increasingly defined by specialization and micro-segmentation, where coverage breadth, jurisdiction, industry exposure, and loss history drive divergent renewal outcomes. Broad market averages do not reflect individual account experience, particularly within excess casualty and umbrella markets where affordability pressures persist. Insurers continue managing long-tail uncertainty through selective capacity deployment, higher retentions, tighter terms, and layered structures.

Casualty pressure snapshot

Sources: Carlton Fields,⁴ Sentry,⁵ Insurance Business⁶

Texas, Florida, California, New York, and New Jersey remain key litigation hotspots, while transportation, healthcare, consumer products, and technology sectors face elevated pressure. Emerging liabilities are creating additional complexity. AI is increasingly viewed as a significant casualty risk, embedded across traditional liability programs while explicit coverage frameworks lag. Social media litigation, per- and polyfluoroalkyl substances (PFAS) contamination, wildfires, abuse liability, product safety concerns, and autonomous systems remain key watchpoints, with wildfire joining PFAS as a hazard drawing intensified underwriting scrutiny and, increasingly, policy exclusions.

Recent legal developments also reinforce how quickly the casualty landscape can evolve. The Supreme Court’s June 2026 ruling in Monsanto Co. v. Durnell addressed a narrow federal preemption issue involving pesticide labeling, potentially reshaping certain failure-to-warn claims for federally regulated products. For insurers with glyphosate-related exposure, the ruling may reduce a long-running source of uncertainty created by years of inconsistent jury verdicts and unresolved failure-to-warn litigation. However, the decision does not address broader product liability litigation, as plaintiffs may still pursue other liability theories. Its ultimate impact on casualty claims, underwriting, and litigation strategy across similarly regulated industries remains a key watchpoint.

As evolving exposures blur traditional coverage boundaries, demand for specialized expertise and liability solutions continues to grow. Insurers are responding with greater scrutiny of governance, operational controls, compliance, and risk management, rewarding organizations that demonstrate strong oversight and preparedness with broader coverage access and more favorable underwriting outcomes.

Source: Swiss Re⁷

General Liability

Structural pressures and emerging risks drive market dynamics

The Baldwin Group client rate trend	Capacity and outlook
Flat to +12%	Selective and disciplined, with sustained pricing pressure

Overview

General liability pricing moderated in early 2026, but underlying loss trends continue challenging market profitability. Rate increases have not kept up with loss-cost trends in many segments, while reserve uncertainty and severity concerns persist. Capacity remains available but varies by industry, venue, and exposure profile, with construction, real estate, healthcare, and hospitality facing the greatest scrutiny.

Insurers are prioritizing contractual precision, attachment discipline, and data-driven underwriting overgrowth. Plaintiff-friendly jurisdictions remain a significant underwriting consideration, while exclusions continue expanding across PFAS, AI, data privacy, environmental, and consumer-product exposures.

Profitability pressure at a glance

Source: Insurance Information Institute,⁸ Risk and Insurance,⁹ Swiss Re¹⁰

Key watchpoints

Liability precedent and legal reform

Social media liability, PFAS litigation, data privacy, and other emerging exposures are shaping new liability precedent and influencing coverage interpretation, reserving, and claim severity. The ongoing Meta social media litigation remains a key watchpoint as courts evaluate theories of liability tied to platform design, addiction, and mental health impacts.

Momentum for tort reform and TPLF transparency is also building across multiple states. Recent reforms have focused on comparative fault standards, medical damages, recovery limitations, and litigation funding disclosure requirements. While recent reforms may help moderate long-term liability trends, their impact is unlikely to alter claims behavior or pricing near term.

Attritional costs and claim inflation

While nuclear verdicts and large-loss activity dominate headlines, insurers are increasingly focused on the cumulative impact of rising attritional losses. Medical inflation, higher legal expenses, wage growth, and increasing claimant expectations are driving severity across routine claims, including slip-and-fall incidents, premises liability, and other traditionally stable exposures. As a result, loss costs are rising even for organizations with limited large-loss activity, placing pressure on profitability across the market.

AI liability and coverage uncertainty

AI-related risks are becoming embedded within traditional general liability exposures, raising new questions around negligence, product liability, bodily injury, reputational harm, and third-party damages. Evolving regulations, litigation, and questions of responsibility for AI-related harm are creating uncertainty around how general liability policies respond. As a result, insurers are refining policy language, expanding exclusions, and closely monitoring potential “silent AI” exposure.

Looking ahead

Meaningful profitability improvement remains unlikely before 2027 without sustained tort reform progress. Defense-cost inflation, litigation funding, and jurisdictional disparities remain key market drivers. Market performance will depend on disciplined reserving, data-driven pricing, and effective claims management. Captives, E&S placements, and other alternative risk solutions are gaining traction as organizations seek flexibility amid affordability and capacity pressures. Meanwhile, AI, environmental, and data-related liabilities are reshaping coverage frameworks and underwriting strategy.

Recommendations

Strong liability outcomes depend on governance, preparedness, and risk differentiation. The Baldwin Group helps organizations strengthen their market position through claims expertise and tailored program design:

• Contractual risk transfer: Review indemnity, additional-insured, and waiver provisions to align contractual obligations with insurance protection and evolving liability standards.
• Claims and litigation readiness: Strengthen incident response, documentation, defense coordination, and litigation management strategies to help control claim severity and improve renewal outcomes.
• Legal and jurisdictional monitoring: Assess litigation trends, regulatory developments, venue-specific dynamics, and legal precedent to inform coverage strategy, limits, retentions, and program structure.
• Coverage assessment: Evaluate emerging liabilities, exclusions, and silent exposures to identify potential coverage gaps and clarify where specialty solutions may be needed.
• Program optimization: Stress-test limits, retentions, attachment points, and excess structures against evolving litigation, inflation, and capacity trends to improve program performance.
• Alternative risk transfer: Explore alternative risk transfer solutions to complement traditional placements and manage long-term liability costs.
• Market strategy: Prioritize long-term insurer partnerships and proactive engagement to support program stability through evolving market conditions.

Commercial Auto Liability

Behavioral risk and loss severity keep profitability recovery out of reach

The Baldwin Group client rate trend	Capacity and outlook
+5% to +20%	Disciplined, with incremental improvement

Overview

Commercial auto liability remains one of the most challenged casualty segments. Despite years of rate increases, loss costs continue outpacing premium growth, limiting profitability improvement. Capacity remains especially selective for heavy trucking, large fleets, and newer operations, with higher-risk placements often shifting to E&S markets. Vehicle complexity, repair-cost inflation, medical severity, and legal system abuse continue driving loss severity, while behavioral factors remain critical underwriting considerations. Telematics, behavioral analytics, and safety culture differentiate underwriting outcomes.

Liability insights and fleet trends

Profitability and severity

Driver behavior and technology

Sources: AM Best,¹¹ Insurance Information Institute,¹² Verisk,¹³ Insurance Thought Leadership,¹⁴ Property Casualty 360,¹⁵ Nationwide,¹⁶ Insurance Business¹⁷

Key watchpoints

Capacity recalibration and reinsurance

Liability performance continues to lag despite gains in physical damage, highlighting a structural imbalance between cost and profitability. High-hazard fleets rely heavily on facultative and international reinsurance layers that preserve capacity but impose tight terms and disciplined pricing. Stable multi-line relationships and portfolio diversification remain key to renewal continuity and favorable positioning.

Predictive AI and telematics maturity

Telematics has become a standard component of commercial auto underwriting, but participation alone is no longer a differentiator. Insurers are increasingly focused on how fleets translate data into action through coaching, leadership engagement, and behavioral improvement. Organizations that can demonstrate a clear link between telematics insights and loss reduction typically achieve stronger underwriting outcomes, while those unable to act on the data face greater scrutiny.

Source: Safety Vision¹⁸

Emerging operational and technology risks

Transportation risks continue evolving beyond traditional collision exposures. Cargo theft, social engineering, and AI-enabled fraud are attracting greater underwriting attention, while climate-related disruption is increasing focus on route reliability, operational continuity, and exposure management. Although autonomous and electric vehicle adoption remains limited across many fleet segments, insurers are closely monitoring how new technologies may influence future liability, operational, and regulatory risks.

Looking ahead

Commercial auto profitability is expected to remain challenged through 2026 as litigation costs, repair inflation, vehicle complexity, and behavioral risks continue pressuring loss severity. Reinsurance caution and reserve pressures are likely to support ongoing underwriting discipline and pricing pressure, while predictive technologies become more deeply embedded across underwriting and claims processes. Captives, structured programs, and other alternative risk-transfer solutions are expected to gain traction as organizations seek stability amid pricing and capacity pressures.

Recommendations

Strong commercial auto outcomes depend on fleet safety, claims management, data transparency, and program design. The Baldwin Group helps organizations strengthen insurer confidence through operational insight and insurer-ready submissions:

• Fleet performance: Deploy telematics, AI-enabled monitoring, driver coaching, and documented safety programs to reduce losses and demonstrate improvement.
• Claims preparedness: Strengthen first notice of loss (FNOL) processes, incident documentation, dash-cam utilization, and claims escalation protocols to help control severity and improve outcomes.
• Submission strategy: Provide complete fleet, mileage, telematics, and loss-run data that demonstrates risk performance and operational transparency.
• Program optimization: Evaluate limits, deductibles, attachment points, and excess structures against evolving severity, litigation, and market conditions.
• Operational and cargo risk management: Address cargo theft, social engineering, route-risk exposures, and operational continuity through targeted controls, technology, and coverage solutions.
• Alternative risk transfer: Explore captives, structured deductible programs, and other risk-financing strategies to complement traditional coverage and support long-term cost stability.
• Market strategy: Maintain proactive engagement with insurers and support renewal discussions with strong data and performance metrics.

Workers’ Compensation

Medical inflation and regulatory complexity test a resilient market

The Baldwin Group client rate trend	Capacity and outlook
-5% to Flat	Stable, with modest pressure emerging

Overview

Workers’ compensation remains one of the strongest-performing commercial lines, but signs of moderation are emerging. Medical severity, workforce demographics, employee turnover, and presumptive legislation are creating new pressure on claim costs and reserving, even as claim frequency trends remain favorable. California is showing the greatest signs of strain, with other states also seeing signs of deterioration. With growing claims complexity and intensifying underwriting focus, investments in prevention, early intervention, and proactive medical management are critical.

Performance and workforce insights

Profitability and severity

Workforce and injury trends

Sources: NCCI,¹⁹ Travelers,²⁰ Property Casualty 360,²¹ Risk and Insurance²²

Key watchpoints

State-level market divergence

Workers’ compensation conditions are diverging at the state level, with California emerging as the clearest stress signal. Rising medical costs, cumulative trauma claims, expanding compensability standards, and reserve pressure are contributing to a more challenging underwriting environment, while other states continue to benefit from strong profitability. Early signs of deterioration are also emerging in New York, Massachusetts, and Illinois, reinforcing the importance of monitoring jurisdiction-specific loss trends, regulatory developments, and pricing conditions rather than relying on national averages.

Source: CLM²³

Mental health and long-tail claim complexity

Mental health, psychological injury, and presumptive claims are driving long-tail exposure and reserving uncertainty. Expanding post-traumatic stress disorder (PTSD), stress-related, cardiovascular, and occupational disease presumptions are increasing complexity for multi-state employers, while rising attorney involvement and litigation funding contribute to longer claim durations, greater settlement complexity, and higher claim costs. Integrated claims management and early intervention are becoming important tools for improving outcomes.

AI, automation, and workplace-risk transformation

AI, automation, robotics, and autonomous systems are reshaping workplace exposures and challenging traditional workers’ compensation risk models. As technology adoption expands, insurers are evaluating how automation may influence injury patterns, workforce composition, and risk segmentation, while new questions emerge around causation, investigation, and responsibility for technology-related incidents. Employers that demonstrate strong executive oversight around emerging technologies may gain an advantage as underwriting frameworks evolve.

Looking ahead

Workers’ compensation is expected to remain one of the strongest-performing commercial lines through 2026, though profitability pressures are building. California warrants close attention as a leading indicator of how medical inflation, expanding presumptions, and reserve pressure could affect other jurisdictions if similar trends emerge. Predictive analytics, AI-assisted claims management, and early intervention strategies are becoming embedded across the market, reinforcing underwriting advantages for employers that demonstrate strong safety performance, effective return-to-work programs, and proactive medical management.

Recommendations

Strong workers’ compensation outcomes depend on proactive safety, claims management, and compliance. The Baldwin Group helps organizations strengthen performance through data-driven insight and insurer-ready program design:

• Workforce safety: Strengthen ergonomics, safety culture, onboarding practices, and injury-prevention programs to reduce frequency and improve workforce outcomes.
• Claims management: Leverage early intervention, integrated medical management, nurse case management, and return-to-work strategies to improve recovery outcomes and control claim costs.
• Pharmacy management: Evaluate specialty pharmaceutical utilization, pharmacy benefit management strategies, and treatment protocols to help control rising medical costs and claim severity.
• Demographic planning: Address risks associated with workforce aging, employee turnover, labor shortages, and workforce dynamics through targeted training, supervision, and support programs.
• Regulatory monitoring: Monitor presumptive legislation, workplace safety requirements, fee schedules, and state-specific developments that may affect claim costs and program performance.
• Claims modernization: Evaluate opportunities to enhance claims administration, communication, reporting, and severity identification through automation, predictive analytics, and AI-enabled tools.
• Program optimization: Review experience modification factors, reserves, deductibles, and alternative risk financing strategies to align program structure with long-term objectives.
• Benefits integration: Align behavioral health, mental health, substance use disorder, employee assistance programs (EAP), telehealth, and care-management resources with claims-management and return-to-work strategies to support recovery, reduce claim duration, improve outcomes, and limit long-tail claim exposure.

Behavioral health, mental health, and substance use disorder challenges can contribute to longer claim durations and more complex recovery outcomes. The Baldwin Group’s employee benefits specialists work alongside our workers’ compensation advisors to align EAPs, behavioral health resources, and care-coordination strategies with broader workforce and risk-management goals.

Umbrella Liability

Elevated severity and emerging liabilities reinforce excess market discipline

The Baldwin Group client rate trend	Capacity and outlook
+5% to +20%	Disciplined, with selective, fragmented capacity

Overview

Umbrella and excess liability markets remain under pressure from elevated loss severity, adverse reserve development, and large-verdict activity. Capacity remains available, but insurers continue managing aggregate exposure through selective deployment, particularly for large accounts and high-hazard industries.

Underwriting scrutiny remains highest for transportation, construction, manufacturing, and other high-hazard classes, where bodily injury severity and litigation trends drive significant losses. Organizations with strong safety performance, contractual risk-transfer practices, and claims management remain best positioned to secure favorable pricing, capacity, and program structure.

Trends shaping excess markets

Source: Risk and Insurance²⁴

Key watchpoints

Emerging liability and AI exposure

Novel technologies and theories of harm are testing liability frameworks that were not designed for today’s risk environment. AI is the most prominent example, raising new questions around algorithmic bias, autonomous decision-making, misinformation, intellectual property, and bodily injury. The Insurance Services Office (ISO) introduced new AI-related endorsements in 2026, accelerating coverage reviews across excess liability programs, while affirmative AI liability solutions continue emerging.

Deepfakes, biometric technologies, autonomous systems, and social media litigation are creating new questions around causation, negligence, and insurability. Fragmented regulatory action across jurisdictions adds further complexity. As liability theories evolve faster than coverage frameworks, organizations should proactively evaluate potential coverage gaps across liability programs.

Venue risk, litigation funding, and tort reform

Insurers are increasingly underwriting to venue rather than state averages as litigation outcomes diverge across jurisdictions. Reform efforts targeting litigation funding transparency and legal system abuse are advancing, but whether they meaningfully alter severity trends remains to be seen. Meanwhile, insurers, defense counsel, and insureds are leveraging predictive analytics and AI-powered litigation tools to assess venue risk, model jury behavior, and strengthen defense strategies earlier in the claims process.

Evolving excess architecture

Traditional $25 million layers are increasingly giving way to smaller $2 million to $10 million tranches assembled through quota-share, buffer-layer, MGA facilities, broker-led facilities, and alternative risk financing structures as insurers seek greater flexibility in managing severity volatility. The continued trend toward smaller, quota-shared excess tranches can obscure the complexity of rebuilding or replacing capacity, particularly for insureds who compare renewal pricing to a prior program assembled under more favorable conditions.

Looking Ahead

Umbrella and excess conditions are expected to remain firm through 2026 as casualty severity and legal system abuse continue challenging profitability. High-hazard industries will remain under the greatest scrutiny, while venue exposure, loss experience, large-loss volatility, and reinsurance costs reinforce underwriting discipline and selective capacity deployment. Insurers are expected to expand their use of predictive analytics, while excess program structures continue evolving.

AI-related regulation is expected to intensify, with insurers refining exclusions, expanding dedicated AI liability products, and adapting underwriting approaches as courts, regulators, and plaintiffs continue testing new theories of liability. While tort reform efforts have yielded incremental relief in select jurisdictions, expanding AI and emerging-technology exposures may offset some of those gains, particularly for organizations with significant technology-related risk.

Recommendations

Umbrella programs demand proactive design and thorough documentation of safety and defense practices. The Baldwin Group partners with your business to strengthen placement strategy, benchmark limits, and sustain insurer confidence. As your trusted advisor, we help you:

• Reevaluate limits: Align umbrella and excess layers with updated loss-severity benchmarks and venue analytics.
• Strengthen documentation: Maintain detailed safety, driver-training, and subcontractor-oversight records to demonstrate control maturity.
• Monitor reform activity: Track state-level developments in litigation-funding disclosure and tort reform to anticipate pricing impacts.
• Leverage analytics: Use insurer and broker modeling tools to identify high-risk jurisdictions and recalibrate defense reserves.
• Diversify insurers: Build layered programs strategically, balancing premium efficiency with long-term partnership stability.
• Plan renewals early: Engage underwriters with data-driven submissions and evidence of continuous safety and claims-management improvements.

Directors & Officers Liability

Underwriting discipline rises as governance and disclosure risks evolve

Overview

The directors and officers (D&O) market is closing out its soft-market cycle with discipline replacing competition as the defining underwriting posture. After several years of aggressive rate decreases and capacity expansion, pricing has largely bottomed-out and insurers are placing greater emphasis on underwriting discipline and portfolio performance. The drivers of that shift vary across public and private organizations.

Public companies face growing scrutiny around securities disclosures, AI adoption, cyber controls, and event-driven litigation, while private organizations contend with rising insolvency risk, creditor actions, and transaction-related exposures. As claims severity and litigation complexity rise, insurers are placing greater emphasis on disclosure integrity, financial performance, and operational controls, rewarding organizations that demonstrate strong oversight and governance practices with more favorable underwriting outcomes.

Source: Cornerstone Research²⁵

Boardroom trends and liability insights

Source: Risk and Insurance,²⁶ Cornerstone Research,²⁷ Insurance Business,²⁸ United States Courts,²⁹ Inigo Insurance³⁰

Key watchpoints

While underwriting drivers differ between public and private organizations, several emerging issues are influencing D&O risk across both markets.

Profitability pressure and severity trends

Strong D&O loss ratios are masking a worsening severity trend across both public and private organizations. Cyber incidents, AI-related disclosures, operational disruptions, and insolvency activity are driving more complex and costly claims, prompting insurers to place greater emphasis on program structure, attachment points, and risk differentiation. While newer entrants continue pursuing growth, established insurers are becoming more selective as severity concerns reshape underwriting priorities.

Regulatory fragmentation and stakeholder scrutiny

Regulatory expectations, corporate-governance standards, and stakeholder priorities are becoming more fragmented across jurisdictions, creating new disclosure and compliance challenges for organizations. Shifting enforcement priorities, workforce policy changes, evolving diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) expectations, and increasing social polarization are exposing boards to scrutiny from multiple directions simultaneously. Plaintiffs’ firms, investors, employees, and advocacy groups continue testing board decisions through litigation, public campaigns, and shareholder actions, increasing the importance of consistent oversight and decision-making.

Governance, technology, and risk differentiation

AI adoption, cyber risk, and emerging exposures are increasing scrutiny of how organizations identify, govern, and communicate risk. Underwriters are placing greater emphasis on oversight practices, operational controls, disclosure integrity, and incident preparedness as they differentiate between organizations with similar financial profiles. As risk-specific underwriting becomes more prevalent, governance quality and risk-management maturity are increasingly influencing pricing, coverage, and insurer appetite.

M&A, runoff, and enterprise-risk convergence

D&O exposures are becoming more interconnected as M&A activity, restructuring, digital transformation, and operational risk shape board liability. Tail and runoff coverage are growing in importance during transactions, while insurers evaluate D&O exposures within the context of broader enterprise risks.

Looking ahead

The D&O market is expected to remain stable through 2026, though the pace of softening will likely continue to moderate as insurers prioritize portfolio performance and risk differentiation. AI-related litigation, cyber governance exposures, insolvency activity, and evolving regulatory expectations are expected to sustain underwriting scrutiny across both public and private organizations. Strong oversight, financial resilience, and coordinated risk-management practices will remain important differentiators at renewal.

Recommendations

A strong D&O program starts with effective oversight, disclosure discipline, and incident preparedness. The Baldwin Group partners with leadership teams to position programs for optimal results:

• Disclosure management: Establish clear processes for evaluating and communicating material developments related to AI, cyber incidents, operational disruptions, and other emerging risks.
• Risk governance: Maintain records that show how strategic, operational, technology, and financial risks are addressed by leadership and the board.
• Incident response: Conduct cross-functional exercises and maintain response protocols that support timely decision-making, regulatory compliance, and effective stakeholder communications.
• Program structure: Reevaluate Side A, excess-layer architecture, limits, retentions, and runoff provisions to align with organizational complexity, transaction activity, and evolving severity trends.
• Policy review: Assess policy wording, exclusions, definitions, and insured-person provisions to address emerging AI, cyber, and regulatory exposures.
• Financial performance: Monitor liquidity, debt obligations, customer concentration, and factors that may influence insolvency, transaction, or creditor-related exposures.
• Submission strategy: Provide underwriters with a clear view of organizational oversight, operational controls, cybersecurity maturity, and recent risk-management enhancements to support favorable underwriting outcomes.

Employment Practices Liability

Litigation, regulation, and AI reshaping workforce risk

Overview

The employment practices liability (EPL) market remains stable, with healthy competition for well-managed organizations and underwriting priorities increasingly focused on governance, workforce practices, and documentation. While claim frequency has generally stabilized, defense-cost inflation, evolving workplace expectations, AI adoption, and changing regulations continue driving claim severity and creating new sources of employment-related liability. Organizations that demonstrate strong HR governance, consistent policies, and effective risk management are best positioned for favorable underwriting outcomes.

Source: Norton Rose Fulbright³¹

Employment risk and litigation trends

Sources: Zurich,³² Jackson Lewis,³³ LexisNexis,³⁴

Key watchpoints

AI technology adoption and governance risks

AI-related EPL exposure is rapidly expanding. With states advancing AI-specific employment regulations, employers face growing scrutiny around bias, transparency, and documentation. For multinational organizations, GDPR consent requirements, EU AI Act obligations, and cross-border data-transfer rules create additional compliance complexity. As AI adoption accelerates, underwriters are increasingly evaluating AI governance practices, including oversight procedures, vendor management, testing protocols, and human involvement in employment decisions.

California as a regulatory bellwether

California is redefining employment-governance regulation, with its trajectory foreshadowing national developments. The state’s AI regulations, privacy requirements, biometric data protections, and employee-notification obligations are influencing compliance expectations well beyond its borders. AI notetaking and transcription tools are also drawing attention under wiretap laws and biometric privacy frameworks, with multi-jurisdiction meetings often triggering overlapping consent requirements.

Proactive alignment with California standards and clear frameworks for managing divergent requirements across jurisdictions are becoming an underwriting expectation.

Workforce governance and discrimination risk

Employers increasingly face liability arising from workforce policies, employment decisions, and changing regulatory expectations. Reverse-discrimination allegations, accommodation disputes, and evolving workplace standards are creating new compliance and litigation challenges as federal and state priorities continue to diverge. Underwriters continue emphasizing consistent governance, documented decision-making, and transparent communication as key indicators of workforce-risk management maturity.

Looking Ahead

EPL conditions are expected to remain stable through 2026, with competition supporting favorable outcomes for well-managed risks. However, AI adoption, workplace technology, regulatory fragmentation, pay-transparency, and biometric privacy requirements are creating new compliance and liability challenges. As workforce technology adoption accelerates, EPL is becoming increasingly interconnected with cyber, D&O, privacy, and broader operational risks. Underwriters will continue rewarding strong HR governance, transparent AI oversight, and defensible workforce-management practices.

Recommendations

A resilient EPL program starts with transparent governance and defensible workforce-management practices. The Baldwin Group partners with organizations to strengthen HR risk posture through proactive compliance, insurer-ready submissions, and coordinated coverage strategy:

• AI governance: Establish oversight frameworks for AI-enabled employment tools, including appropriate controls, accountability, and documentation.
• HR documentation: Maintain consistent records supporting employment decisions, accommodations, investigations, and disciplinary actions.
• Manager training: Regularly train managers about harassment prevention, accommodations, retaliation, workplace conduct, and evolving employment risks.
• Workforce governance: Review workplace policies, accommodation procedures, and return-to-office practices to support compliance and consistency.
• Compensation and compliance: Monitor wage-and-hour, pay-transparency, and biometric privacy requirements as regulations continue evolving.
• Coverage strategy: Evaluate EPL structure, limits, and policy coordination alongside D&O, cyber, and privacy exposures.
• Renewal preparation: Highlight governance, workforce-management, and risk-management enhancements during renewal discussions.

Fiduciary Liability

Governance, oversight, and litigation expanding fiduciary obligations

Overview

The fiduciary liability market remains stable, with flat to modestly lower renewals for well-governed plans and steady capacity across most segments. Competition has returned, though underwriting discipline persists, especially for large or specialized plans where governance complexity, plan size, or data-handling practices elevate perceived risk.

Excessive-fee litigation remains active, but fiduciary scrutiny is expanding beyond retirement plans into health-plan administration (tobacco surcharge litigation), vendor oversight, and data governance. Underwriters continue to favor plan sponsors demonstrating robust governance, transparent vendor oversight, and clear fiduciary documentation.

Key watchpoints

Critical litigation in focus

Fiduciary litigation is expanding beyond traditional fee claims. Plaintiffs now target forfeiture practices, defined-benefit plan calculations, health-plan administration, pharmacy benefit manager (PBM) oversight, actuarial-equivalence claims, and vendor compensation arrangements. The Supreme Court’s Cunningham v. Cornell University decision reinforced plaintiffs’ ability to advance fiduciary claims, increasing pressure on plan sponsors to demonstrate prudent oversight and well-documented decision-making.

Courts remain divided about the enforceability of arbitration clauses and class-action waivers in plan documents, keeping litigation strategies and defense costs highly variable by jurisdiction. However, the market has adjusted to excessive-fee litigation risk.

Investment governance and regulatory divergence

Diverging federal and state policies continue creating complexity for fiduciaries evaluating investment strategies and oversight practices. While some jurisdictions encourage consideration of broader risk factors, others have imposed restrictions or heightened scrutiny. Underwriters increasingly expect clear committee minutes, diligence records, and documented rationales supporting investment decisions, regardless of strategy.

Health-plan fiduciary exposure

Fiduciary scrutiny continues expanding into health and welfare plans, where transparency, fee disclosure, parity compliance, and benefit-denial practices remain active litigation fronts. Recent PBM litigation has heightened expectations around pharmacy-benefit oversight, vendor compensation, and fiduciary decision-making, increasing the importance of benchmarking, documentation, and governance discipline. Insurers continue monitoring PBM transparency, spread pricing, rebate arrangements, MHPAEA compliance, and RxDC reporting as health-plan fiduciary exposures evolve.

Looking Ahead

Market conditions are expected to remain stable through 2026, with competition supporting favorable outcomes for well-governed plans. However, expanding scrutiny of health-plan administration, PBM oversight, vendor compensation, and fiduciary decision-making is likely to sustain litigation activity and increase documentation expectations. Governance quality, oversight practices, and vendor-management discipline will remain key underwriting differentiators.

Organizations that regularly benchmark fees, review service-provider relationships, and maintain clear fiduciary documentation will achieve the strongest renewal outcomes.

Recommendations

A strong fiduciary liability strategy begins with strong governance and proactive oversight. The Baldwin Group partners with organizations to strengthen fiduciary readiness through defensible governance practices, vendor oversight, and insurer-ready documentation:

• Governance discipline: Maintain clear committee charters, documented decision-making processes, and regular reviews of investment, fee, and plan-management practices.
• Vendor oversight: Evaluate service providers regularly, including recordkeepers, PBMs, TPAs, and other key partners, with emphasis on transparency, compensation structures, cybersecurity controls, and performance.
• Compliance readiness: Monitor evolving fiduciary, transparency, and disclosure requirements while maintaining controls that support regulatory compliance.
• Health-plan governance: Review pharmacy-benefit arrangements, fee structures, parity compliance, and vendor-management practices to support prudent oversight of health and welfare plans.
• Cybersecurity posture: Align fiduciary, cybersecurity, and vendor-management controls to address data protection, third-party risk, and plan-asset security.
• Coverage optimization: Coordinate fiduciary, D&O, cyber, crime, and EPL to address overlapping governance, regulatory, and data-related exposures.
• Renewal preparation: Present governance enhancements, benchmarking activities, vendor reviews, and audit findings proactively to support favorable underwriting outcomes.

Health-plan governance, PBM oversight, and transparency compliance are becoming increasingly important components of fiduciary risk management. The Baldwin Group’s employee benefits specialists partner with organizations to address health plan and PBM-related risks, helping align vendor oversight, compliance practices, and health-plan governance with evolving fiduciary obligations.

Cyber Liability

Market competition persists amidst growing cyber risk complexity

Overview

The cyber market has reached a period of measured stability, but competitive conditions mask underlying threat complexity. Claim frequency has declined, but severity is rising as ransomware, AI-enabled social engineering, business email compromise (BEC), and third-party outages generate large, complex losses. Cyber risk today is interconnected, with third-party disruptions capable of cascading across thousands of organizations simultaneously.

Capacity remains healthy, supported by stronger loss performance, underwriting maturity, and ample capacity. As competition intensifies, coverage quality, response capabilities, and pre-breach services are key differentiators at renewal. Underwriters continue rewarding organizations with mature controls and governance practices.

Market dynamics

Threat and loss trends:

• Fraud and social engineering – Social engineering, business email compromise (BEC), credential compromise, funds-transfer fraud, and AI-enabled deception continue driving a growing share of cyber claims as attackers target people and trusted relationships.
• Ransomware evolution – Data-theft extortion is increasingly replacing encryption-based attacks, while business interruption remains a primary loss driver.
• Identity-based attacks – Credential theft and trusted-access exploitation continue outpacing traditional malware-based attacks, underscoring the importance of identity and access management controls.
• Human and insider risk – Employee actions, process failures, and insider threats reinforce the importance of verification controls and workforce oversight.
• Business interruption – Ransomware, cloud outages, and third-party disruptions remain significant operational loss drivers, increasing focus on recovery planning.
• Geopolitical cyber risk – State-sponsored activity, cyber spillover events, and critical infrastructure threats are increasing as geopolitical tensions persist.

Technology and accumulation risk:

• Technology debt – Legacy systems and aging infrastructure continue increasing cyber vulnerability and recovery costs.
• High-risk industries – Healthcare, manufacturing, financial services, retail, public sector, supply chain-dependent, and other industries with elevated cyber threat exposure face greater scrutiny.

Sources: Chubb,³⁵ Insurance Business,³⁶ Munich Re,³⁷ Swif,³⁸ Norton Rose Fulbright³⁹

Key watchpoints

Systemic cyber risk and vendor dependency

Cyber risk is increasingly driven by systemic events that propagate through shared technology platforms and digital supply chains. Large-scale incidents have demonstrated how a single point of failure can disrupt thousands of organizations simultaneously, generating losses far beyond the directly affected entity. These events have also highlighted a significant protection gap, with economic losses frequently exceeding insured recoveries.

Underwriters are responding with greater scrutiny of vendor dependencies, cloud concentration, and operational resilience. Insurers continue to refine contingent business interruption definitions, sublimits, and triggers as claims have revealed how imprecisely early policy forms addressed third-party outage scenarios.

AI-driven cyber risk

Threat actors are using AI to enhance phishing, social engineering, deepfakes, voice cloning, and vulnerability discovery, lowering barriers to entry and increasing the speed and sophistication of attacks. AI is also creating new governance, liability, and insurance challenges. Underwriters are evaluating AI governance, vendor oversight, and human-review processes, while organizations navigate exposures that extend beyond cyber insurance into D&O, EPL, E&O, and other coverage lines. Coverage approaches remain fragmented as insurers adapt to the rapidly evolving risk landscape, with some piloting AI-specific endorsements to clarify triggers and exclusions tied to misuse or data integrity.

Data collection, privacy, and regulatory complexity

Driven by pixel tracking, website analytics, session-replay tools, chatbots, and third-party data-sharing practices, privacy litigation is rising. Claims are increasingly tied to routine data collection, consent failures, and privacy compliance issues rather than traditional cyberattacks. Coverage for privacy-related claims remains inconsistent across the market, making policy wording, coverage coordination, and data-governance practices crucial.

Privacy and data-governance requirements also remain fragmented across jurisdictions, increasing compliance complexity for multistate and multinational organizations. Meanwhile, regulators, customers, and insurers are emphasizing documented compliance and framework alignment, with updates to NIST, ISO, and CMMC shaping expectations.

Looking Ahead

Cyber market conditions are expected to remain stable and competitive through 2026, but exposure complexity continues growing faster than pricing. AI-enabled threats, vendor concentration risk, fragmented regulations, and geopolitical instability will remain key challenges. Underwriters are expected to place increasing emphasis on control maturity, continuity planning, governance, and third-party risk management as they refine coverage approaches for emerging exposures. Closer alignment among cyber, technology E&O, privacy, and management liability programs is also expected as organizations navigate increasingly interconnected risks.

Recommendations

A comprehensive cyber insurance program includes control maturity, operational strength, and precise coverage architecture. The Baldwin Group partners with organizations seeking to maximize cyber insurance recovery, manage emerging exposures, and improve renewal positioning. As part of an enterprise-wide view on cyber risk management, consider implementing these best practices that can positively influence your cyber insurance program:

• Align coverage: Review business interruption, ransomware terms, vendor dependency, privacy, and AI-related coverage for alignment with operational risk.
• Coordinate policies: Align cyber, technology E&O, property, crime, D&O, and privacy coverage to reduce gaps across interconnected exposures.
• Map digital dependencies: Identify critical vendors, cloud providers, and data flows; document contingency plans and recovery procedures.
• Harden access controls: Implement phishing-resistant multi-factor authentication (MFA), privileged-access management, endpoint detection, immutable backups, and tested restoration procedures across critical systems.
• Train for AI-enabled attacks: Incorporate deepfakes, voice spoofing, business email compromise, and AI-generated phishing scenarios into awareness training and payment-verification processes.
• Govern AI deployment: Establish documented frameworks covering model oversight, vendor management, data governance, validation, and human review.
• Bolster governance: Review consent practices, data-sharing arrangements, and privacy compliance obligations, aligning practices with evolving regulations.
• Align to recognized frameworks: Maintain alignment with NIST, ISO, CIS, CMMC, and other applicable frameworks to demonstrate control maturity and support compliance, underwriting, and customer requirements.
• Strengthen vendor oversight: Assess critical vendors regularly and validate their security, resilience, and incident-response capabilities while reviewing contractual obligations and concentration risk across key providers.
• Coordinate policies: Align cyber, technology E&O, crime, D&O, and privacy coverage to reduce gaps across interconnected exposures.
• Leverage pre-breach services: Utilize insurer-provided legal, forensic, incident-response, and risk-management resources to strengthen preparedness.

Excess & Surplus Market

Specialization and underwriting discipline define the next phase of E&S growth

Overview

The excess and surplus (E&S) market is increasingly a permanent, mainstream component of commercial insurance placement. Growth is moderating from several years of double-digit expansion, but demand remains strong as catastrophe exposure, emerging liabilities, and complex risks continue driving business into non-admitted channels. Admitted-market retrenchment in select property and casualty segments continues supporting E&S growth, while new capital, expanding MGA platforms, and technology-enabled underwriting are reshaping capacity sourcing and deployment. Underwriting discipline remains central as the market enters a more mature phase of growth.

E&S Market Snapshot

Source: Risk and Insurance,⁴⁰ Insurance Business⁴¹

Key watchpoints

E&S as a permanent market pillar

The E&S market has evolved from a niche outlet for distressed risks into a mainstream placement strategy for catastrophe-exposed, complex, and specialty risks. Scale, data quality, underwriting expertise, and execution capabilities are becoming increasingly important differentiators as the market matures. While premium growth is moderating, the slowdown reflects a market entering a more mature phase of development rather than weakening demand. As property markets soften and casualty lines remain firm, sustaining underwriting discipline may become more challenging as competitive pressures increase.

Specialty risk growth

The E&S market’s flexibility, speed to market, and adaptable policy forms position it as a leading solution for emerging exposures that admitted markets are not yet equipped to underwrite with confidence. Data centers, AI infrastructure, renewable energy, and other technology-driven risks are among the fastest-growing segments, driven by specialized underwriting requirements, evolving loss profiles, and significant capacity needs. As investment in new technologies and infrastructure accelerates, E&S insurers are increasingly serving as the testing ground for risks that may reshape the broader commercial insurance market.

California and Texas as market indicators

California remains the clearest example of how catastrophe exposure, rising loss costs, and regulatory constraints can accelerate migration into E&S markets. What began as a solution for high-hazard properties increasingly serves a broader range of risks as admitted insurers reduce participation in challenged segments. Texas is exhibiting similar dynamics, with catastrophe activity, population growth, and rising property values driving greater reliance on flexible underwriting solutions. Together, these states provide an early indication of how climate risk, regulatory frameworks, and insurance availability may reshape insurance markets across the country.

Looking Ahead

E&S growth is expected to continue at a more measured pace through 2026 as the market transitions from rapid expansion to a greater focus on profitability and underwriting performance. Property may experience additional softening as capacity remains abundant and competition intensifies, while casualty lines should remain firm amid elevated severity and loss-cost pressures. Regulatory reforms may gradually reshape the balance between admitted and non-admitted markets.

Catastrophe volatility and emerging risks should continue supporting demand for non-admitted capacity, even as conditions improve in select segments. Technology-enabled underwriting and analytical capabilities are expected to become key differentiators as market growth moderates. Organizations that invest in submission quality, mitigation documentation, and strategic insurer relationships will be best positioned as the market’s performance phase takes hold.

Recommendations

Navigating the E&S market requires strong risk presentation and strategic placement. The Baldwin Group helps organizations align coverage, capacity, and underwriting strategy with evolving risks:

• Evaluate program strategy: Assess whether E&S should serve as a long-term component of risk financing and integrate admitted and non-admitted solutions, where appropriate.
• Strengthen submission quality: Provide detailed underwriting information, documented mitigation efforts, and transparent risk data to improve capacity access and pricing outcomes.
• Prioritize insurer stability: Evaluate financial strength, reinsurance support, claims-handling capabilities, and long-term commitment when selecting insurers.
• Monitor market conditions: Track pricing trends, coverage terms, and underwriting discipline as new capital enters the market.
• Address emerging exposures: Use E&S flexibility to structure coverage for AI, cyber, data centers, renewable energy, and other specialized risks requiring customized solutions.
• Monitor regulatory developments: Follow state-level reforms, catastrophe trends, and capacity shifts that may influence market access, pricing, and placement strategies.
• Leverage catastrophe mitigation: Document wildfire, wind, hail, flood, and other mitigation investments to strengthen underwriting outcomes and attract capacity.
• Maintain continuity: Build long-term relationships with insurers that understand your risk profile and can provide consistent support through market cycles.
• Educate stakeholders: Position E&S as a strategic tool for addressing complex and evolving risks while enhancing flexibility and insurability.

In Conclusion

The commercial risk environment continues to evolve as economic, technological, geopolitical, and regulatory forces become increasingly interconnected, reinforcing each other in ways that require a more integrated approach to risk management and insurance strategy. Organizations that approach risk proactively by investing in governance, organizational preparedness, and informed decision-making are better positioned to adapt to changing conditions and capitalize on new opportunities.

Success in today’s market requires more than securing insurance at renewal. It starts with understanding how risk affects the broader organization, identifying areas of vulnerability, and aligning risk management, operational priorities, and insurance strategies to support long-term objectives. Organizations that demonstrate resilience, transparency, and a commitment to continuous improvement are often best equipped to achieve favorable underwriting outcomes and sustainable results.

The Baldwin Group partners with commercial organizations to navigate complexity with clarity, precision, and confidence. Through strategic program design, data-driven insight, and specialized expertise across every line, we help you strengthen operational readiness, make well-informed choices, and protect what matters most through every challenge and opportunity ahead.