Morningstar DBRS highlighted in a recent report that as most sectors of the U.S. commercial property and casualty (P&C) insurance market are experiencing significant softening, the U.S. casualty line remains an outlier through the third quarter of 2025, with rates continuing to rise.
Reasons for the rate decline include competition, strong market volume from earnings in previous years and lower reinsurance rates.
However, while property insurance rates may be declining, U.S. casualty insurance (which protects businesses and individuals from injury or property damage) remains an exception to this trend, primarily because they are expensive and difficult to underwrite.
The report notes that casualty insurance underwriting is challenged by two main factors: the inherent long-tail nature of claims and the accelerating impact of social inflation.
The extended timescales of long-tail claims make accurate final cost predictions difficult. This complexity is greatly exacerbated by high social inflation, which includes changing social attitudes, changes in the legal environment, and an increase in litigation, all of which push claims costs well beyond initial projections.
A major factor in social inflation is America’s deeply ingrained litigation culture, characterized by jury practices such as awarding larger damages to plaintiffs, and abuse of the legal system (LSA).
This has led to an increase in the frequency and size of jury verdicts, particularly “nuclear verdicts,” generally defined as jury verdicts exceeding $10 million.
In response to these changes, insurance companies are raising premiums, requiring higher deductibles, and strengthening policy language by adding exclusions and stricter underwriting terms and conditions.
“Despite the high number of lawsuits and rising claims, the U.S. casualty insurance market remains attractive due to its size, product and regional diversity, and pricing flexibility,” Morningstar DBRS analysts said.
Companies can avoid some products with traditionally high claims, such as loss-making commercial auto liability insurance business, and underwrite other products to enrich the product structure and reduce the accumulation of insurance risks.
U.S.-based insurers can also seek greater geographic diversification by doing more business in other countries or U.S. states with less litigation.
Victor Adesanya, Senior Vice President, Global Insurance and Pensions Ratings, concluded: “We expect casualty insurance pricing to remain differentiated from other products in the property and casualty insurance market in the near term.
“Overall, we do not expect rate weakness in the property and casualty market to weigh on credit ratings, as most insurers benefit from diversification of their product portfolios and geographic distribution and can still increase their casualty insurance rates.”