Keefe, Bruyette & Woods, Inc. (KBW), an investment bank and research firm focused on financial services, expects overall commercial insurance rate increases to moderate in 2025 following years of compounding gains across most lines of business.

Drawing on detailed pricing data from MarketScout, an industry analytics provider tracking insurance rate trends, KBW highlights that although the pace of rate growth will slow, these increases will continue to broadly benefit commercial insurers and, to a lesser extent, brokers.

MarketScout’s data shows that commercial insurance rates rose by 3.0% year-over-year in May 2025, a slight deceleration from April’s 3.3%. KBW’s analysis interprets this as a sign that rate growth remains positive but is beginning to slow, potentially falling below normalised loss cost trends.

Focusing on property insurance, KBW notes, based on MarketScout’s figures, that rate increases are easing, particularly for large accounts and catastrophe-exposed risks.

These segments saw significant rate hikes between early 2023 and mid-2024, driven by sharp increases in reinsurance costs and ongoing weather-related losses.

Smaller commercial property risks, particularly those exposed to frequent secondary perils, are expected to experience moderate rate growth.

Conversely, KBW expects casualty insurance lines to see modest acceleration in rate increases due to persistent social inflation and adverse reserve development, as insurers reassess the adequacy of earlier pricing assumptions related to older accident years.

Examining MarketScout’s line-by-line data for May 2025, KBW identifies a mixed pattern: only Workers’ Compensation, Crime, and Surety lines recorded sequential rate increases, while six lines—including Business Interruption, Inland Marine, Umbrella/Excess, Directors & Officers Liability, Employment Practices Liability, and Cyber—showed slower rate increases.

The remaining six lines remained stable. Workers’ Compensation rates rose by 1% following a prolonged period of flat pricing, reflecting concerns over rising claims severity and medical inflation, which KBW believes may pressure loss ratios before rate adjustments follow.

MarketScout’s data further reveals that rate trends differ by account size. Large and jumbo accounts saw decelerating rate increases, small accounts remained flat, and medium-sized accounts experienced slight acceleration.

KBW interprets this as evidence that larger catastrophe-exposed accounts are starting to see actual rate decreases after years of steep increases.

Looking ahead, KBW expects core underwriting margins for most well-reserved commercial re/insurers to remain stable or improve modestly in 2025 as premiums from previous rate hikes and increased exposure levels materialise.
Insurers who have factored elevated social inflation into their 2024 loss estimates may see improved core loss ratios year-over-year.

From an investment standpoint, KBW continues to recommend Outperform-rated specialty commercial insurers such as AIG, AXS, BOW, CB, CINF, HIG, RLI, SKWD, and TRV, as well as Bermudian reinsurers ACGL, EG, HG, and RNR.
These firms are positioned to benefit from stable or improving underwriting results and earnings growth, based on KBW’s interpretation of MarketScout’s pricing data.

In the brokerage sector, KBW favours AON, BWIN, RYAN, and WTW, citing their solid organic growth and margin expansion prospects.

However, KBW cautions that the slowing rate momentum may create headwinds for brokers, especially considering their currently elevated valuations.

Summarising their outlook, KBW states, “We expect rate increases to broadly benefit both the commercial re/insurers and, to a lesser extent, the brokers, although we view the fading tailwind as a challenge to many brokers’ still-elevated valuations.”

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