Key Takeaways
- The E&S P&C market is in a strong position, supported by disciplined underwriting and strong carrierappetite.
- The E&S marketplace has recorded 14 consecutive years of premium growth, with Casualty linesrepresentingthe majority ofdirect premiums written.
- Social inflation, nuclear verdicts, and litigation funding continue to influence underwriting and pricing decisions, while tort reform in select states is beginning to improve the litigation environment.
- Technological advancements—such as CAT modeling, DIY inspections, and Parametric solutions—are reshaping underwriting and risk management.
- Strong global capacity across Commercial and Personal lines is expanding coverage options and supporting competitive market conditions.
- Emerging risks, particularly those related to A.I., are being addressed through evolving policy language, with the E&S market serving as an incubator for new coverages.
- The 2026 outlookremainsconstructive, with disciplined underwriting, ample capacity, and continued innovation supporting sustainable growth.
INTRODUCTION
2026 will bea pivotal year for the Excess and Surplus (E&S) marketplace within Property and Casualty (P&C) following the unique market dynamics of 2025. In short, market cycles are shifting with a softening hard market combined with E&S expansion. This creates both challenges and opportunities for brokers and agents.
The market is characterized by moderate growth,plentifulcapacity, and strong underwriting discipline. That discipline is necessary given the continued impact of social inflation, nuclear verdicts, and private equity-funded litigation support for the plaintiff’s bar. The good news is that the industry has adjusted to these challenges with proactive strategies designed to limit their impact.
The E&S market has recorded 14 straight years of premium growth, often with double-digit increases. It has doubled its share of total P&C premiums compared to a decade ago,according to a September 2025 article onBeinsureMedia. Casualty lines now account for more than half of the direct premiums written in the Excessspace.
Sector health is further represented by carrier profitability. Therelatively tameAtlantic Hurricane season (covered in more detail below) helped, motivating more carriers to enter vertical and geographic markets.
Carriers increasinglyreleasingreserves
Numerous carriers have reduced the amount of money they set aside for claims as overall claim frequency has declined. As a result, many carriers outperformed initial financial projections for 2025, postinggenerally positivebalance sheets. The use of reserve releases has alsoemergedas a trend that partially offsets the effects of social inflation and runaway jury awards, which typically drive rates higher. This is a development that many industry leaders, from regulators to rating agencies, will be closely watching.
Regulatory and litigation trends
State legislative activity is shifting how carriers view states. For example, Georgia attracted significant litigation in recent years, rivaling New York, Illinois, and other states where some carriers have reduced their business. Civil litigation filings in Atlanta-area courts rose sharply in 2024 and continued to increase in 2025, with tens of thousands more cases than in prior years, according toInsurance Journal.
However, the Georgia legislature passed some tort reform bills in 2025 that may lessen the number of filings in 2026 and beyond.
Tort reform is having a positive impact in other states as well, including Florida. Nuclear verdicts are falling, and the tort reforms passed in 2022-23eliminatedone-way attorney fees, whichbarred Assignment of Benefits (AOBs) in new policies, tightened rules for bringing bad-faith claims, and created broader tort-reform measures, according toInsurance Journal.
TheInsurance Insiderhighlighted Florida Insurance Commissioner Mike Yaworskyin December, whoindicatedthat bothestablished, national carriers and newly formed ones are actively pursuing new business in the Sunshine State. These reforms are causing carriers to show more interest in doing business in Florida.
RATES
We arewitnessinga period of “measured hardening” in the P&C sector. Pricing discipline is expected to hold in many core lines with less aggressive rate increases, according toReinsurance News.
Rating agencies such as Fitch alsoindicatethat underlying fundamentals and profitability remain solid. As a result, single-digit increases are likely across many sectors. However,with January 1 reinsurance renewals making headlines, we expect moderate rate reductions across the board.
CAPACITY
Little has changed over the past year in terms of capacity availability among most P&C verticals. Part of that availability is tied to the broad access that brokers and agents have to global carrier capacity. Most industry experts suggest that the amount of capital willing to write non-admitted/specialty P&C riskglobally is higher than at any time in the last decade. Meanwhile, reinsurers are increasingly comfortable backing E&S platforms. We expect available capacity to continue.
TERMS & CONDITIONS (T&C)
Carriers have carefully reviewed the language within theirpolicies in recent years. This language should remain consistent across Property and Liability, particularly given the impact of social inflation, runaway jury awards, and litigation funding. These challenges will require continued underwriting discipline, with little easing expected. Carriers recognize thatmaintainingthis discipline over the long term is essential topreservingthe progress made in recent years.
Contributor: Paul G. Smith, Group Senior Vice President, H.W. Kaufman Group, New York, NY
Personal Insurance:
Last year began with record-setting wildfires in Southern California that generated more than$50 billionin industry losses, creating early uncertainty. However, theremainderof the year proved more benign with other catastrophic (CAT) events.
U.S. CAT weather-related claims were lower than expected in 2025, particularly in the Southeast. A closer look suggests that luck may have been a contributing factor.
Despite an active Atlantic hurricane season with 13 named storms, only one tropical storm made U.S. landfall, according to the National Oceanic and Atmospheric Administration (NOAA). It was the first time since 2015 that so few named storms reached the U.S. This provided carriers with much-needed relief and allowed many to post profitable results.
Those California fires were the costliest wildfires on record, resulting in an estimated$40 billionin insured losses. U.S. wildfire acreage was below levels seen in some recent peak years and, in many areas, below long-term averages, partly due to varying regional weatherpatterns and early-season conditions across much of the West Coast, according to the California Department of Forestry and Fire Protection.
Large hailstorms were less frequent, and severe flooding was less widespread across the U.S., although some areas still experienced serious conditions. A December 19 article inThe Wall Street Journalreferenced Swiss Re data that suggests that 2025’s natural-catastrophe insured losses “are still within 5% of the prior 10-year, inflation-adjusted average annual loss.”
Given these and other factors, rate pressure began to ease across parts of the Personal Insurance market, signaling a shift toward increased competition for high-quality risks. This helped improve carrier profitability.
We expect improved availability of “blue-chip” paper in 2026, reducing reliance on unrated or government-backed options. Challengesremainfor ultra-high-value homes and high-profile liability risks, but overall conditions are improving in both admitted and E&S markets.
Continued advancements in technology and modeling
Technology is a central consideration for brokers and agents managing their portfolios.
Carriers and wholesalers are using advanced modeling to manage geographic concentration of risk across wildfire, convectivestorm,flood, and coastal exposures. This helps reduce surpriselossaccumulation.
Furthermore, modern catastrophe modeling is reshaping underwriting outcomes. For example, newer homes with strong risk-mitigation features receive more favorable treatment in CAT-exposed areas, which supports long-term pricing stability and profitability.
Parametric – supplement for flood coverage
As flood risk increases and deductibles rise, Parametric Insurance has become an effective tool for managing exposure. Unlike traditional Primary and Excess Flood coverage, ParametricFlood insurancepays outwhen a predefined trigger—such as measured water levels—is met rather than based on actual loss, providing faster and more certain payment. This approach is commonly used to offset or buy down Flood deductibles.
app & Wilcox, the largest provider of Flood solutions in the E&S marketplace, recently launched an exclusiveParametric Flood offeringin partnership with Atain Insurance Companies, an “A” rated (Excellent by AM Best) carrier, andFloodbase, a leading AI platform for monitoring and insuring flood risk. The solution is available across multiple sectors, including commercial property, cannabis, transportation, hospitality, and municipalities.
The program delivers highly granular flood analytics for single or multiple locations using satellite data, IoT, artificial intelligence, and historical flood analysis. In addition to Parametric solutions, the app & Wilcox Flood Practice Group also offers direct-to-agentFloodquoting through itsIssueQuickdigital platform.
Contributor: Bill Gatewood, Executive Vice President, Personal Insurance, app & Wilcox, Farmington Hills, MI
Commercial Insurance:
Commercial lines posted slower growth than in prior years as carriers prioritized profitability and early signs of rate softeningmoderatedpremium expansion. Social inflation, runaway jury verdicts, and third-party litigation funding continue to influence rate volatility and capacity across markets.
Key segment trends include:
- Property– Well-controlled, low-hazard risks may experience price declines and modest improvements in terms. CAT-exposed risksremaincarefully underwritten, but negotiation opportunities extend beyond pricing alone to structure, limits, and deductibles. Carriers continue to emphasizeaccuratevaluation and risk quality, particularly as inflation and weather volatility influencelossseverity.
- General Liability– Overall pricing is stable, though pockets of firmness persist—especially in Construction, Habitational, and other liability-heavy lines, and in specific geographic regions like New York. Litigation environment andlossseverity remain central underwriting considerations, influencing terms, exclusions, and attachment points.
- Excess–Pricingremainsstable; however,nuclear verdicts and auto-heavy underlying exposures continue to create long-term uncertainty.
- Cannabis– Regulatory complexity and federal illegality continue to push cannabis risksalmost entirelyinto the E&S market. Rates and capacity remain variable, andinsureds increasingly rely on specialized carriers and customized coverage structures.
- Hospitality & Habitational– Litigation trends, assault-and-battery exposure, and firearms-related risks continue to pressure pricing and coverage terms. Exclusions,sublimits, and elevated deductibles are increasingly common, particularly for large venues and multifamily residential risks.
- Transportation– social inflation, litigation funding, repair costs, and driver shortages will limit rate relief. Capacity is shrinking, making submission quality, dataaccuracy,and timing critical. See the Transportation update later in the report foradditionalinsights.
While rates varied by geography—driven by tort reform, weather patterns, demand, and other regional factors—overall pricing showed signs of moderation. An influx of new market entrants increased competition, leading to more aggressive pricing and some market share shifting away from traditionalcarriers, particularly within the E&S segment.
At the macro level, social inflation has added an estimated$200 billionin costs to the Commercial Insurance sector over the past 16 years, with littleindicationof near-term relief. A December 2025Insurance Insiderarticle noted that litigation funding is only one of several forces contributing to this trend.
Against this backdrop, carrier selectivityremainsa defining feature of the market. While some carriers tightened deployment in specific areas last year, overall capacity did not materially contract. Continued growth in the MGA segment has intensified competition while alsoexpandingterms and conditions.
As a result, many clients continue to rely on the E&S market, increasingly seeking customized coverage solutions unavailable in the standard market. This dynamic creates opportunities for brokers and agents to develop more tailored and creative approaches to meeting client needs.
Contributor: Scott Higgins, Executive Vice President, Commercial Insurance, app & Wilcox, New York, NY
Professional Liability:
Most Professional Liability lines stayed competitive last year, with the notable exception ofSexual Abuse and Molestation (SAM) coverage, whichremainsone of the mostchallengingsegmentsof the market. Capacitytightenedand program structures continued to evolve, despite earlier expectations for broader market firming. Legislative changes—most notably the removal of statutes of limitation in certain states—are worsening the claims environment and are likely to further constrain capacity.
In addition, long-term care facilities, particularly step-down homes that provide an intermediate level of acute care between hospitalization and traditional nursing homes, continue to face limited appetite due to elevated claim frequency and litigation pressure from social inflation and attorney-driven claims.
Outside of these challenged areas, the broader Professional Liability market remained soft, supported by Excess capacity across most lines.
- Errors & Omissions (E&O)continuestobenefitfromstrong competition, limiting pricing movement despite evolving loss trends.
- Directors and Officers (D&O)remainsvery soft; however, growing profitability concerns are emerging, driven by increased claims activity andlossseverity.While pricing has continued to decline, underwriters are increasingly focused on riskselectionand long-term performance.
- Cyberpricing continues to remain competitive as capacityremainsample; however, rising claims frequency and severity are beginning to influence underwriting behavior and will alter the overall pricing trajectory.
These competitive dynamics were reflected in rate performance across Professional Liability lines, which varied by coverage type. Cyber rates declined approximately 2.6%; D&O fell about 2.1%; and Employment Practices Liability (EPLI) remained soft with isolated pockets of firming. Miscellaneous Professional and Allied Health lines werelargely flatand competitive.
Looking ahead, Cyber is the ProfessionalLiabilityline most likely to see rate increases in 2026. Risinglossfrequency and severity—particularly from systemic events—combined with longer claim tailsare creatinggradual upward pricing pressure.
An influx of new carriers and MGAs expanded capacity across ProfessionalLiabilitylines, reinforcing competition and limiting broad-based rate increases for 2026 renewals. However, emerging profitability pressures—most notably rising severity, longer development tails, and increased frequency in Cyber—are expected to drive tighter underwriting discipline and greater pricing scrutiny going forward.
A.I. sparking dialogue around coverage innovation
A.I. is becoming a growing focus across the insurance industry as new exposuresemergethat are not clearly addressed by traditional policy language. While A.I.-related risks aregenerally notaffirmatively included under most standard policies, the market is still assessing how these exposures fit within existing coverage frameworks.
Standalone A.I. coverage is unlikely in the near term, with A.I. exposures more likely to be addressed through definitions, endorsements, clarifications, or sub-limits within existing policies.
This topic is expected to remain prevalent for the P&C sector, as A.I.-driven errors and unintended consequences can be costly for organizations. app & Wilcoxrecently profiledthe adversefinancial impacton Deloitte resulting from A.I.-influenced errors contained in a report created for the Australian government.
Two general carrier approaches are emerging: some carriers are exploring more affirmative A.I. language or coverage considerations, while others are relying on existing policy language and limits as theymonitorexposure and claims activity.
The bottom line is that the A.I. space will continue to evolve, and the E&S market is expected to play a role in helpingestablishinsurance options. Separating A.I. exposure from broader Professional and Management Liability products will take time, with careful policy language scrutinyremainingcritical as the market develops.
Contributor: Andy Wood, Vice President, National Professional Liability Practice Leader, app & Wilcox, Chicago, IL
Transportation Insurance:
The Commercial Auto and GarageInsurance marketplaceremainschallenging as we enter 2026. Combinedlossratios continue above 100%, and underwriting discipline is expected to persist. Rate increases have now stretched across 55 consecutive quarters, with carriersmaintainingfirm pricing and a selective approach to risk.
- Loss severity is rising due to inflation, nuclear verdicts, repair costs, supply-chain delays, and growing exposures from electric vehicles (EVs).
- Regulatory enforcement of English-languageproficiencyfor drivers intensified in 2025, worsening driver shortages and increasing scrutiny of B1 and Mexico-licensed drivers.
- Garage Insurance opportunities are expanding, especially for mobile mechanics, heavy truck repair, and non-franchised dealers.
- Capacity is available but selective. Complete submissions, strong safety culture, and telematics can improve pricing and options.
Carriers are emphasizing proactive loss mitigation—telematics, cameras, documented hiring and training standards, and regular maintenance protocols are increasingly rewarded. Brokers and agents should educate clients on regulatory changes, review coverage regularly, and highlight unique operational details to secure competitive terms.
Partnering with app & Wilcox andleveragingourexpertiseand broad market accessremainsessential for navigating complex risks and adapting to evolving market conditions.
Contributor: Gene’ Cain, Broker, Transportation, app & Wilcox, Brokerage Division, Atlanta, GA
Environmental Insurance:
The Environmental Insurance marketplace enters 2026 with a cautiously optimistic outlook, shaped by regulatory pressures, emerging contaminants, and evolving risk management strategies. After several years of volatility, premium rates are stabilizing, with most lines experiencing modest increases. Contractors Pollution Liability (CPL) is expected to remainlargely flat, with slight upward adjustments of up to 5%, while Site Pollution Liability (PLL/EIL) may see increases in the range of 0% to 10%. Combined programs that integrate Environmental coverage with Casualty, Professional, or Excess layers are projected to rise between 5% and 10%. These trends reflect a competitive marketplace where new carriers and expanded carrier appetite are cooling rate escalation despite rising claim costs.
Capacityremainsa critical theme in2026. While the influx of new carriers and innovative products has eased pressure on primary layers, excess capacity continues to tighten, particularly in high-risk exposures such as Environmental Auto Liability in certain regions. This has led to reductions in available limits and, in some cases, non-renewals. Brokers and insureds are increasingly turning to layered programs across multiple carriers to manage pricing andmaintaincomprehensive coverage.
From a growth perspective, the Environmental Insurance market is on a strong upward trajectory. Global estimates suggest the sector could approach$979.7 billionin2026. The green insurance niche—covering eco-friendly and sustainability-focused products—is expected to grow even faster, fueled by Environmental, Social, and Governance (ESG) mandates and consumer demand for environmentally responsible solutions.
Several factors are contributing to this growth. Regulatory tightening and enforcement of environmental standardsremainprimary drivers, alongside heightened ESG transparency requirements and investor pressure for sustainable practices.
In summary, 2026 marks a period of steady growth and transformation for Environmental Insurance. While premium increases are moderate, the market is characterized by expanding capacity, innovative product development, andheightenedattention to emerging contaminants. For agents, brokers, carriers, and insureds alike, success will hinge on partnering with knowledgeableEnvironmentalInsurance professionals, proactive riskmanagementand strategic layering of coverage. The long-term outlook is robust, with Environmental Insurance positioned as a criticalcomponentof global risk management strategies in an era of increasing environmental accountability.
Contributor: Beth Linton, Vice President, Environmental Brokerage, app & Wilcox, Brokerage Division, Atlanta, GA
REINSURANCE MARKET UPDATE
Property reinsurance pricing softened more than expected during the January 1 renewal cycle. U.S. property CAT excess-of-loss rates declined 12–15%, exceeding initial market expectations. This can be attributed to abundant capacity and oversubscribed placements.
Several years ofrelatively limitedCAT losses have resulted in strong returns and continued flow of capital into the property reinsurance market. As a result, further softening isemergingin E&S property pricing, and we expect continued ratedecreasesin 2026.
A positive for property reinsurers, insurer retentionsgenerally heldstable in this renewal cycle, which is notable given that insurer retentions had beenpushed upsignificantly over the past few renewal cycles.
Casualty reinsurance remained stable but segmented. Unlike property, which experienced meaningful softening, casualty pricinglargely heldfirm. Outcomes varied by account composition and quality, with well-performing portfolios achieving improved terms, while auto-heavy or distressed General Liability exposures continued to face pressure.
We did see increased reinsurance capacity in the January reinsurance renewals, driving some casualty placements to be oversubscribed. Well-performing accounts did achieve moderate rate decreases and increased ceding commissions in some cases. Despite the increased capacity, reinsurers still express underlying concerns with the US casualty market, so broad-based softening across the market appears unlikely.
Contributor: ChrisZoidis, President and Chief Executive Officer, Atain Insurance Companies, Farmington Hills, MI
LONDON MARKET UPDATE
Property
The 2025 Property marketwas a year oftransition. Key developments include softening rates and strategic shifts within the London market. With the 1/1 reinsurance negotiations for 2026 underway, U.S. Property Cat buyers are expected tobenefitfrom further increased rate flexibility, with rate reductions projected at 15-20% for the forthcoming year. Stamp capacity growth has slowed for many major syndicates, signaling more caution as we enter the new year. Meanwhile, investment in technology continues to be a significant focus, and within the London market a riseofcross-class facilitationremainsa central theme. Lloyd’s CEO Patrick Tiernan reported 50% growth in cross-class facilities, highlighting a trend toward streamlined placement and efficiency.
Last year began with significant wildfire losses in California, estimated at $40–50bn, followed by an extremely benign U.S. storm season with no major hurricanes making landfall. This favorable catastrophe environment has accelerated rate reductions throughout the second half of the year and is expected to continue into 2026. Coastal states are experiencing the greatest pressure onrating, driven by both local and London markets competing aggressively for business.
Looking ahead, while market conditions suggest continued softening, success will depend on disciplined underwriting and strong strategic partnerships. Technology-drivenefficienciesand innovative facility structures will play an increasinglyimportant rolein sustaining growth and profitability. Maintaining underwriting rigor and adapting to evolving market dynamics will be critical as we navigate the challenges and opportunities of 2026.
Contributor: Kerry Hall, Head of app & Wilcox Lloyd’s Products, app & Wilcox Global app, London, UK
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Q4 2025 signaled a shift toward a softer phase.Lloyd’swarned that Casualty price adequacy is “probably insufficient,” even as Property rates fell and Cyber growth ambitions accelerated; management emphasizedmaintaininglong‑term return hurdles amid narrowing margins and a more competitive distribution landscape (facilities, structured solutions). Independent commentary echoed this, noting that rate alone cannot be relied upon—discipline around terms, attachment points, and portfolio selection is central as follow‑market models face pressure from facilitation and broker structures. At a macro level, AM Best revised its London Market outlook to stable, citing signs of softening and persistent social inflation risk, albeit supported by higher investment yields and ongoing demand from U.S. E&S lines.
Casualty pricing/placement in London
By late‑2025, Primary Casualty was broadly competitive, with General Liability (GL) increases moderating and Workers’ Compensation typically flat, while Auto Liability remained elevated due to claims severity and repair complexity (including EV battery issues). Excess/umbrella towers showed continued diligence—lower layers and loss‑affected accounts seeing high single to low double‑digit moves, but with stabilization compared to the 2023–2024 peaks; carriers remained wary of auto exposure and attachment points. Overall, capacity was available, yet it often required more markets to complete limits, and incumbents increasingly traded margin toretainpositions on clean accounts.
Bermuda Casualty
Bermuda entered Q4 with firmer pricing, but signs of moderation: low‑hazard risks achieved flat to +6%, while high‑hazard or loss‑affected exposures remained +5% to +20%, supported by disciplined underwriting and selective capacity growth. Indications point to appeals tempering nuclear verdicts and to an expected “Class of 2026” of new carriers, which could broaden appetite at various attachment levels andoccupancies.
Spring 2025 updates had already highlighted litigation inflation and constrained capacity as persistent drivers for casualty—conditions that have eased only on cleaner accounts.
Capital & renewal dynamics into 2026
Balance sheets remained strong: Bermuda (re)insurers posted robust returns despite a higher combined ratio (~90% for 2024) and rising catastrophe loss contributions; market pricing passed its peak, but underwriting discipline and alternative capital (ILS) underpinresilience. January2026 renewals suggest an orderly market with moderating Property‑CAT rates andlargely intactterms; third‑party capitalroseand sidecars extended beyond property—supporting flexible capacity deployment across specialty and, selectively, Casualty. For London, Lloyd’s projects 2026 growth with a 91.2% target net combined ratio but reiterates that sustainable profitability hinges on careful monitoring of price adequacy and the evolving battle for distribution facilities and structured solutions.
Trends heading into 2026
Expect continued rate moderation and broader capacity for clean Casualty risks, counterbalanced by pressure on auto‑related segments and higher‑hazard classes (Construction, Habitational) where severity persists. As mentioned in lastquarterupdate, structured solutions and multi‑year deals will expand for preferred risks (especially in Bermuda), while London will see facility‑led placements grow, challenging pure follow models and rewarding underwriters and brokers who articulate differentiated value. Social inflation and litigation funding remain watch‑items; however, appeals dampening nuclear verdicts, and new entrants suggest a more stable—but still disciplined—Casualty landscape.
Contributor: Declan Durkan, Managing Director, Non-Marine, app & Wilcox Global app, London, UK
CONCLUSION
The E&S marketplaceremainsresilient following the unusual conditions of 2025, extending its streak of premium growth to 14 consecutive years. Casualty lines now account forthe majority ofE&S premiums. Despite pressure from social inflation, nuclear verdicts, and litigation funding, carriers have preserved profitability through disciplined underwriting, reserve management, and favorable tort reforms in states such as Florida and Georgia.
Technology and innovation are increasingly central to underwriting and risk management strategies. Advances in catastrophe modeling, alternative inspection methods,Parametric solutions, and clearer policy language for emerging risks—such as artificial intelligence—are helping carriers manage volatility. At the same time, ample capacity and moderate rate softening across commercial and personal lines are improving market access and coverage quality.
Looking ahead to 2026, the outlook is cautiously optimistic, with expectations for continued expansion, competitive but sustainable pricing, and a more predictable operating environment. While challenges persist, the E&S sector’s adaptability, regulatory improvements, and technologicalintegrationposition brokers, agents, and carriers for steady growth and effective responses to evolving client needs.
Contributor: Paul G. Smith, Group Senior Vice President, H.W. Kaufman Group, New York, NY
Disclaimer: The above information has been prepared solely for the purpose of sharing general information regarding insurance and business practice management issues. These are just our opinions and are not intended to constitute legal advice or a determination on issues of coverage.
