As the US commercial property and casualty (P&C) insurance market is experiencing significant softening across most sectors, as of Q3 2025, US casualty lines remain an exception, with rates continuing to rise, Morningstar DBRS highlights in a recent report.
The decline in rates had been driven by competition, strong market capacity on the back of prior profitable years, and declining reinsurance rates.
However, while property rates may be dipping, US casualty lines – which protects businesses and individuals for injury or property damage – remain an exception to the trend, mainly due to the fact that they are expensive and difficult to underwrite.
Casualty insurance underwriting is challenged by two primary factors: the inherently long-tail nature of claims and the accelerating impact of social inflation, the report notes.
The extended timeline of long-tail claims makes accurate final cost prediction difficult. This complexity is significantly worsened by high social inflation, which encompasses evolving societal attitudes, shifts in the legal landscape, and increased litigation, all of which elevate claim costs substantially beyond initial projections.
A major contributor to social inflation is the entrenched litigation culture in the US, marked by jury behaviour, such as larger awards to plaintiffs, and Legal System Abuse (LSA).
This has led to a rise in the frequency and size of jury awards, particularly “nuclear verdicts,” which are typically defined as jury verdicts exceeding $10 million.
In response to these changes, insurance companies are increasing premium rates, requiring higher deductibles, and strengthening policy language through the addition of exclusions and stricter coverage terms and conditions.
“Despite the high number of litigations and escalating payouts, the U.S. casualty insurance market remains attractive due to its size, product and regional diversity, and pricing flexibility,” Morningstar DBRS analysts state.
Companies can avoid some products that traditionally generate high claims, such as the loss-making commercial automobile liability insurance business, while writing more of other products to diversify their product mix and reduce insurance risk accumulation.
US-based insurers can also seek greater geographic diversification by writing more business in other countries or in US states that tend to be less litigious.
Victor Adesanya, Senior Vice President, Global Insurance & Pension Ratings, concluded: “We expect casualty insurance pricing to remain divergent from the rest of the P&C insurance market in the near term.
“Overall, we do not anticipate softening rates in the P&C market to pressure credit ratings, as most insurers benefit from diversification in their product mix and geographic footprint and can still increase their casualty insurance rates.”
