Commercial Insurance In 2026: Stability Isn’t Simplicity

At first glance, commercial insurance performance heading into the second half of 2026 looks reassuring. Property and casualty (P&C) premium growth is slowing, competition has returned to property markets that felt nearly inaccessible just two years ago, and insurers that had stepped back from difficult risks are re-engaging. Many agents are relieved to see these changes. 

But a stabilizing market is not a simple one. The market has fragmented around risk quality and submission quality in ways that are easy to underestimate when looking at index-level data rather than individual renewals.

S&P Global, in its P&C 2026 Outlook, projects the median combined ratio for the 16 largest U.S. P&C insurers at 92.1%, a slight deterioration from 91.7% in 2025, with 12 of the 16 expected to see year-over-year worsening. The aggregate picture looks stable; however, the underwriting reality is more demanding.

After more than two decades in the industry, moments like this stand out. When conditions begin to improve, it can be tempting to ease up. In practice, this is often when preparation matters most.

The surplus lines shift

One of the most significant market developments of 2026 isn’t dominating the headlines: The surplus lines market has genuinely reopened. Carriers that had gone dark for anything but pristine risks are back, competing for business, and that competition is translating into outcomes that would have been unthinkable 18 months ago.

Consider this example of a recent commercial property renewal of an older frame building with a claims history. In prior years, it was challenging to secure even partial limits. Multiple carriers were required just to approach adequate coverage, often at significant cost. This year, that same risk renewed at a 16% premium reduction and full insurable value with a single carrier.

This is not an isolated outcome. Many surplus lines brokers are describing a soft property market and, for the first time in years, agents are remarketing policies rather than accepting what they can get.

That said, the improvement is uneven. Marsh reported in its Global Insurance Market Index, Q4 2025 that U.S. property rates were down 8%, but most of that relief is concentrated in well-managed, lower catastrophe-exposed risks. For more challenged risks, the difference can be significant.

The other major caveat is storm season. In its 2025 Weather, Climate & Catastrophe Insight Report, Aon estimates that natural disasters in 2025 generated $260 billion in total losses and $127 billion in insured losses, with severe convective storms alone accounting for $61 billion.

Carriers and reinsurers are watching 2026 closely. If severe weather activity accelerates, the capacity and competition we are seeing today will likely not be the story in Q4. Agents with accounts coming up for renewal in the next 60 to 90 days should be moving on those now.

Where capacity is (and isn’t)

Not all commercial real estate assets are experiencing the same market conditions. Data centers, for example, are attracting significant carrier interest, driven by significant premium potential across development and stabilization. Prime office is also attracting selective capacity. These are the accounts that carriers are actively pursuing.

Multifamily and hospitality tell a different story. Admitted markets remain largely unwilling to write habitational risks, meaning agents are still heavily dependent on surplus lines for those placements. While conditions have improved, underwriting scrutiny remains high.

Older buildings, mixed-use properties with complex tenant profiles, and properties with deferred maintenance continue to face tighter scrutiny. The market has not become indiscriminate. It has become more competitive for the right risks.

Understanding where carriers are leaning in—and where they remain cautious—can shape both strategy and client expectations.

The second half of 2026 may not resemble the hard market conditions of recent years, but it is no less demanding. Stabilizing rates do not indicate relaxed underwriting. Preparation, documentation, and positioning play a greater role in outcomes.

Liability isn’t softening

While property markets are showing signs of relief, casualty lines continue to move in the opposite direction.

Social inflation has not eased. Marsh reported U.S. casualty rates up 9% in Q4 2025, and umbrella and excess risk-adjusted rates up 19%, with higher retentions and broader exclusions becoming standard. Swiss Re notes in its social inflation research that U.S. liability claims costs have risen 57% over the past decade.

Liability programs built for the 2022 or 2023 market may no longer be adequate. Umbrella towers are being restructured, attachment points are under review, and accounts that previously built their excess program with two or three carriers may now need four or five to achieve the same limit. Nuclear verdicts and plaintiff-friendly venues continue to shape underwriting behavior, and there is little indication of near-term change.

Employment practices liability (EPL) deserves specific mention. EPL claim costs grew approximately 7% in 2024, the largest annual increase in two decades, according to the Swiss Re Institute. The plaintiffs’ bar has become increasingly sophisticated, and many claims that used to settle relatively cleanly are now generating significant verdicts. A thorough review of EPL limits and retentions is crucial for clients in higher-risk jurisdictions.

Builder’s risk: Relief with limits

Builder’s risk is showing some improvement, particularly for non-structural work with credentialed contractors and well-documented contracts. Structural renovations still draw more scrutiny and require more documentation.

Conversions remain the hardest category. Carriers are typically uncomfortable insuring a property being used for something other than its original purpose. Office-to-residential conversions nearly doubled in 2025 per JLL, a real estate and investment management firm, but volume has not translated into carrier appetite; if anything, it has made underwriters more cautious.

On high-value projects, layered limits are still standard. High total insured values often require multiple carriers, and extensions beyond initial timelines draw careful review. Setting realistic timelines—and supporting them with clear documentation—can make a meaningful difference during underwriting.

Cyber: Exposure beyond the organization

Cyber rates fell 3% in Q4 2025, according to the Marsh Index, but underwriting expectations have expanded. The conversation has moved beyond data breach and privacy liability to operational resilience across the broader ecosystem. Claims are no longer coming primarily from internal network compromises, but from vendors, clients, and third-party platforms with system access.

Smart building systems, like access control, heating, ventilation, and air-conditioning (HVAC), elevators, and building automation platforms, introduce new exposures. The FBI reported in its Internet Crime Complaint Center’s Annual Report that internet crime losses exceeded $16 billion in 2024, with business email compromise among the most costly categories. Recent guidance from the Cybersecurity and Infrastructure Security Agency highlights growing risks tied to operational technology connectivity.

Underwriters are looking for risk management beyond internal systems. That includes reviewing vendor contracts, confirming third-party cyber coverage, and documenting risk transfer across the supply chain. Accounts that can demonstrate this level of discipline tend to be better positioned at renewal.

Commercial auto: Moderation, not relief

Commercial auto rate increases are moderating, but claim costs remain high, driven by large verdicts, elevated medical expenses, and vehicle repair costs, according to the Marsh Index. Telematics, driver training programs, and maintenance records are increasingly required rather than preferred. Accounts without fleet management practices are finding fewer markets willing to compete. In many cases, the renewal conversation needs to begin with operations, not pricing.

Guidance for the second half of 2026

For agents and brokers, this market rewards preparation and timing.

If you have property renewals approaching within the next 60 to 90 days, consider moving early. The current surplus lines environment presents opportunities, but it remains sensitive to external factors such as weather activity.

Encourage clients to address previously identified risk issues. Even when a carrier makes an informal recommendation, it is on record. Carriers do not forget, and the question at the next renewal will be whether anything was done about it.

Start renewal strategy conversations before the renewal process begins. Review what carriers focused on last year, what was said, and what the client committed to. Clients who engage early tend to experience fewer surprises.

Finally, ensure that valuations and submission data are current. Carriers are increasingly validating data through aerial imagery, satellite assessments, and geographic information systems (GIS). Discrepancies identified during underwriting can be difficult to overcome.

The second half of 2026 may not resemble the hard market conditions of recent years, but it is no less demanding. Stabilizing rates do not indicate relaxed underwriting. Preparation, documentation, and positioning play a greater role in outcomes.

This market rewards thoughtful strategy. Right now, it also rewards speed.

The author

Jennifer Neal is vice president and account executive in B. F. Saul Insurance’s commercial lines practice. With over two decades of experience, she works with clients across a range of industries to develop risk strategies and navigate evolving market conditions.