Upland Specialty Insurance: 2025 E&S Market Outlook
The U.S. excess and surplus (E&S) insurance market experienced a compound annual growth rate of 21% over the past five years. It is anticipated that the 2025 E&S market will maintain its growth trajectory, but at a more moderate rate with total direct premiums projected to exceed $100 billion. The market's flexibility and capacity for innovation will continue to attract clients seeking coverage for unique exposures.
The 2024 growth rate slowed down from previous years due to tempering market conditions in some predominant E&S product lines. “Despite this, the market did see expansion driven by factors such as higher loss activity, increased reinsurance costs, and a limited appetite among admitted carriers to write business in catastrophe-prone areas due to the increasing severity of natural disasters and social inflation,” stated Jim Damonte, President and Chief Underwriting Officer for Upland.
The E&S insurance market is expected to remain in a hard market phase in 2025 and continue to experience elevated premiums, stricter underwriting standards, and reduced capacity for certain risks. Increased Loss Activity due to the rising frequency and severity of natural disasters, such as hurricanes and wildfires, have led to higher claims costs as well as the growing trend of larger jury awards and settlements in liability cases becoming a significant factor. Higher reinsurance costs have also been passed down to primary insurers, contributing to increased pricing combined with the ongoing economic challenges and inflationary pressures adding to the overall risk environment.
Claims Outlook
Across the market, rising social inflation and the continued growth of third-party litigation funding (TPLF)continue to impact claims outcomes. One of the leading players in the TPLF arena recently announced a goal to raise $1 billion for its new fund.
“On a positive note, several ongoing Racketeer Influenced and Corrupt Organizations (RICO) suits in the New York construction sector continue to develop and gain momentum,” added Rich Smith, Upland Chief Claims Officer. “The tort reform legislation unveiled by Georgia’s governor also marks a positive trend following Florida’s tort reform in 2023.”
Technology Outlook
“At Upland, we continue to evaluate transformative technology like AI to augment our well-defined business process workflows to allow our teams to scale,” stated Kate Walas, Chief Operating Officer. “We start small, focusing on solving business inefficiencies, automating lower-level tasks and incrementally building on success. Our goal is to deliver decision making insights for our Underwriters that allows them to optimize their workflows while continually improving the experience for our customers.”
In the following content, Upland’s underwriting leadership has provided their market outlook for the following risk environments:
· Casualty Construction
· Excess Casualty
· Product Recall
· Cyber Liability
Casualty Construction Market Outlook
“Growth in the US construction market for 2025 is expected to be much higher in the residential market (12%) than in the commercial market (2%),” stated Carl Dowling, Senior Vice President of Casualty Construction Liability. The combination of housing shortages and lower interest rates make residential construction more attractive. Increased regulations, the reduced need for office space due to remote work, and retail sector challenges such as online shopping are making commercial construction more challenging.
The Los Angeles wildfires are going to have a significant impact on the construction industry, both financially and otherwise. There were over 16,000 structures damaged, and the total property and capital losses are estimated to range between $95 billion and $164 billion. Material and labor costs are expected to increase due to shortages, and the timeline for rebuilding could take up to a decade.
The creation of the Department of Government Efficiency (DOGE) may lead to federal spending cuts, including a reduction in the number of federal construction contracts. Uncertainty in government spending and increased competition for the reduced number of contracts will likely result in companies that rely heavily on government projects needing to evolve.
The possible re-imposition of tariffs on imports may have a direct impact on the construction industry. There could be disruption to the supply chains, increased construction material costs such as steel, aluminum and wood, and ultimately, higher prices for completed construction projects. In the short term, project delays or cancellations are likely to result, but in time, these tariffs may also lead to a shift to domestic production and increased investment in US manufacturing and job creation.
Excess Casualty Market Outlook
The first few months of 2025 have been a mixed bag of results, with the most common theme among transactions being tower disruption. “Capacity restrictions, increased attachment point requirements as well as the rate increases carriers are pushing to stay ahead of, or in pace with, trend are having the biggest impact to tower placement strategies,” stated Shanna Sweeney, Senior Vice President, Excess Casualty Liability.
Auto continues to prove the most difficult risk with compounding effects from prior year development, claims reopening, and massive increases in claims costs. Excess Casualty faces another unique challenge with concerns of delayed reporting and adequate reserve setting.
In the construction sector, the experience between project and renewable is split. We are seeing stagnation and even some relief in commercial project rates, especially in regions with shorter CD tails. However, in the renewable portfolio, we are experiencing increased pressure on upward rate movement, mostly driven by commercial auto fleets.
The casualty sector most negatively affected by inflationary trends is in the products, agriculture and food space, while premises risks and large habitational schedules are continuing to see rate increases as well.
“The E&S market is nimble and creative, and despite the challenges, I anticipate 2025 will require continued underwriting discernment and a solution-oriented approach,” Ms. Sweeney concluded.
Product Recall Market Outlook
“In 2024 the recall market experienced a significant increase in product recalls, setting the stage for a six-year high.” stated Daniel Akerman, Senior Vice President, Product Recall. The food sector experienced a number of notable high profile recalls as well as an increase in attritional losses largely driven by increased regulatory scrutiny and advances in testing methods used by regulators.
Similarly, the automotive space saw an increase in loss activity primarily involving electronics and software, which both play an ever-increasing role in the operation of a vehicle. The increase in loss activity combined with an already soft rating environment has led a number of carriers to implement stricter capacity management policies which we hope with help rates to stabilize in 2025.
2025 will introduce a host of new unknowns for the market to navigate including a new U.S. administration focused on reforming government agencies such as the FDA, USDA, NHTSA and the CPSC. We can also expect increased protectionist policies which will result in manufacturers having to uproot legacy supply chains in search of partners based in more favorable territories.
Average capacity deployment will likely continue in a downward trend throughout the year, and we expect an increase in interest in product recall coverage following the heightened activity over the past 12 months combined with the regulatory uncertainties that lie ahead. This combination should ultimately have a positive impact on the product recall rating environment.
Cyber Liability Market Outlook
The cyber liability market in 2025 is poised for continued growth, with industry forecasts predicting annual premium increase of 15-20%, reaching approximately $23 billion by the end of 2026. “This growth is driven by heightened cyber threats, increased regulatory scrutiny, and the expanding role of cyber insurance in enterprise risk management,” stated Jackie Lee, Senior Vice President, Excess Cyber Liability.
After experiencing significant premium hikes in previous years, the market has begun to stabilize. Rates are expected to remain relatively flat or decline slightly in some cases, as carriers adjust to improve cyber security measures among policy holders. Cyber threats continue to evolve, with ransomware, social engineering, and supply chain vulnerabilities remaining key concerns. The rise of generative AI introduces both opportunities and risks. Threat actors are leveraging AI to conduct more sophisticated attacks, while companies must navigate new compliance and regulatory challenges.
“The cyber liability market in 2025 is marked by a balance between competitive pricing and heightened underwriting scrutiny. As cyber risks continue to evolve, organizations must stay ahead of threats and regulatory developments to secure comprehensive and cost-effective coverage,” concluded Ms. Lee.
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About Upland Capital Group
Upland Capital Group, Inc. is an AM Best rated “A-” VIII specialty property/casualty insurer headquartered in Dallas, Texas. Through its wholly-owned insurance carrier, Upland Specialty Insurance Company, the company markets, underwrites and services wholesale specialty insurance products in select markets to include excess transportation, construction casualty, excess casualty, primary general liability, excess public entity, professional liability, excess cyber liability, and product recall.
Media Contact: Blake Zipoy, Director, Marketing and Communications, bzipoy@uplandcapgroup.com