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The Commercial Insurance Market Is Splitting in Two. Here Is What That Means for Your Renewal.

  • Business Insurance

The 2026 commercial insurance market is the most bifurcated in recent memory, and most business owners are reading it wrong. Property rates are declining as carrier capacity has returned to the market following several years of catastrophe-driven increases. Cyber pricing is softening as competition among carriers intensifies and loss experience has remained more favorable than underwriters anticipated. Directors and officers liability has stabilized after years of market volatility.

At the same time, general liability, commercial auto, and umbrella and excess coverage are telling a very different story. Loss trends of 12 to 15% are persisting in general liability, driven by social inflation and nuclear verdict exposure. Commercial auto has posted underwriting losses for fourteen consecutive years and continues to harden for fleet accounts. Umbrella and excess capacity has quietly shrunk as reinsurers have restricted their exposure to the casualty lines most affected by social inflation. A business that looks at its total renewal number and concludes the market is softening may be missing significant increases in the casualty lines that matter most.

Where Rates Are Declining and Why

Commercial property has seen meaningful rate decreases in 2026 as carrier capacity returned to the market following the 2023 and 2024 catastrophe seasons. Reinsurance pricing stabilized, allowing primary carriers to compete more aggressively for well-managed commercial property accounts. Businesses with demonstrable property risk management — updated roofing, upgraded electrical systems, documented building maintenance programs — are seeing the most favorable property renewals they have had in four years.

Cyber insurance has shifted dramatically from the rate environment of 2021 and 2022. Competition among cyber carriers has intensified, and for businesses that can demonstrate strong security controls, pricing has declined meaningfully from peak levels. According to recent market analysis, businesses that implement the five core security controls now required as baseline underwriting standards have seen premiums stabilize or fall 50 to 60% compared to businesses without those controls. The catch: businesses that cannot demonstrate those controls are facing flat denials or premium increases that can exceed 300%.

Directors and officers liability has hit a floor after years of market correction. Primary coverage for private companies is seeing flat renewals in most segments, and for private company D&O accounts with clean governance histories, pricing is no longer moving in the wrong direction.

Where Rates Are Still Rising and Why

General liability is under sustained upward pressure that is not a short-term phenomenon. Nuclear verdict exposure — the same social inflation dynamic driving commercial auto losses — is now moving through general liability pricing as underwriters price in the expectation of large plaintiff verdicts on claims that would have settled at lower amounts five years ago. Accounts with retail, hospitality, or manufacturing operations, where third-party bodily injury exposure is highest, are seeing the most significant GL increases.

Commercial auto remains the most structurally challenged line in property and casualty insurance. The line has generated underwriting losses in 14 consecutive years, and the forces driving those losses — claim severity, nuclear verdicts, vehicle repair costs — are not easing. Fleet accounts that have not invested in telematics, documented driver monitoring programs, and safety training are being penalized at renewal. Those that have built the documentation are receiving more favorable treatment, though favorable is a relative term in a market with sustained double-digit severity trends.

Umbrella and excess capacity has shrunk quietly. Reinsurers have restricted their exposure to the casualty lines most affected by social inflation, and that restriction has flowed through to the primary market. Businesses operating with umbrella limits and attachment points that were set three or more years ago may be carrying programs that no longer reflect current verdict trends. A $5 million umbrella that was adequate for a company’s liability profile in 2021 may be inadequate for the same company’s liability profile today, without any change in the underlying operations.

How to Read Your Renewal in a Bifurcated Market

The most common mistake in a mixed market is evaluating the total premium change and losing sight of which lines are moving and why. A business that sees its total commercial program renew flat may be experiencing a significant property decrease offsetting a significant GL and umbrella increase — a trade-off that looks fine on the total but represents a meaningful shift in where its protection is concentrated.

Three questions are worth asking before accepting any renewal in the current market. First: which lines are increasing and what is the stated reason for each increase? A GL increase attributed to general market trends is a different conversation than a GL increase attributed to a specific loss. Second: are the limits and structures on the lines that are increasing still adequate for current verdict trends? Third: have you been presented with alternatives — plan design changes, deductible adjustments, coverage restructuring — or only a rate?

The commercial insurance team at Tooher-Ferraris reviews complete commercial programs across all lines rather than treating renewal as a single-number negotiation. Learn more at https://toofer.com/commercial-insurance/ and https://toofer.com/specialty-programs/.

The Insurance Information Institute publishes current market data and line-by-line rate trend information at iii.org. RIMS, the risk management society, provides detailed commercial insurance market analysis at rims.org.

Frequently Asked Questions

Why are property rates declining in 2026 while liability rates are still rising?

Property and casualty lines are driven by different underlying loss dynamics. Commercial property pricing reflects catastrophe loss experience and reinsurance capacity, both of which have improved. Liability lines — particularly general liability and commercial auto — are driven by claim severity trends, social inflation, and nuclear verdict exposure, none of which have improved materially. The result is a market moving in opposite directions simultaneously, which is the defining characteristic of the 2026 renewal environment.

How does social inflation affect commercial liability premiums?

Social inflation refers to the rising cost of insurance claims driven by increased litigation, broader legal interpretations of liability, plaintiff-friendly jury decisions, and third-party litigation funding. It affects general liability, commercial auto, and umbrella pricing because insurers must price in the expectation that claims that historically settled at lower amounts will now produce larger verdicts or settlements. The effect compounds over time as prior-year reserves prove inadequate and carriers adjust their prospective pricing.

What should I ask my broker about my commercial program renewal this year?

Ask for a line-by-line breakdown of what is increasing, what is decreasing, and the stated reason for each movement. Ask whether your limits and structures on liability lines still reflect current verdict trends in your industry. Ask what alternatives were considered before the renewal as presented. A broker who can answer all three questions with specifics — not generalities — is providing the level of analysis the current market requires.

Ready to review your complete commercial insurance program in the context of the current market? The team at Tooher-Ferraris has been helping businesses navigate commercial renewal since 1932. Contact us today to schedule a no-obligation consultation — https://toofer.com/contact-us/

Related Post

  • Personal Lines

Around 60% of Homeowners Are Underinsured. Here Is How to Find Out If You Are One of Them.

Around 60% of homeowners are underinsured, meaning their dwelling coverage falls short of the actual cost to rebuild their homes, according to industry estimates cited by Financial Sense in early 2026. Only about 30% of homeowners have increased their coverage to match rising building costs, even though cumulative construction costs have risen more than 30% in recent years. The average construction cost of a typical single-family home reached $162 per square foot in 2024, up from $80 per square foot in 2011. For homeowners in affluent suburban markets where finish quality and labor costs run above national averages, that figure is often higher.

The underinsurance gap does not announce itself. It is invisible during routine claims — a broken pipe, storm damage to a roof, a fallen tree — where the loss falls within policy limits regardless of whether the dwelling coverage is adequate. The gap becomes catastrophic during total losses, when the rebuild cost exceeds the policy limit and the homeowner is responsible for the difference out of pocket. Four misconceptions drive most of the underinsurance problem.

Myth 1: My Home’s Market Value Is My Replacement Cost

Market value and replacement cost are two different numbers that bear no reliable relationship to each other. Market value includes the land the home sits on — land is never destroyed in a fire or storm and is never what an insurance policy covers. Replacement cost is the expense of rebuilding the physical structure from the foundation up, at current labor and material costs, under current building codes. In most markets, the land accounts for 25% to 50% of the market value of a property. A homeowner who insures their $900,000 home at its full market value is almost certainly overinsuring their dwelling while carrying inadequate personal property and liability coverage — or they have chosen their Coverage A limit based on the wrong number entirely.

The correct number is the replacement cost estimate, which accounts for square footage, construction type, finish quality, local labor costs, and current material prices. Most carriers offer replacement cost estimator tools; independent appraisals provide additional validation for homes with custom finishes or non-standard construction.

Myth 2: The Insurance Company Set the Right Limit When I Bought the Policy

The dwelling coverage limit set at policy inception reflected rebuild costs at that time, using whatever estimating methodology the carrier applied at the time of underwriting. Construction costs have risen sharply and unevenly since 2020. A limit that was adequate in 2021 may be meaningfully inadequate today, because the rebuild cost of the same house has increased while the policy limit has increased only modestly — if at all.

After Colorado’s Marshall Fire, 74% of policyholders were found to be underinsured, and 36% were severely underinsured, meaning their coverage was below 75% of the actual rebuild cost. Those homeowners did not choose to be underinsured. They accepted the limit their carrier set at policy inception, assumed the annual inflation guard increase was keeping pace with actual cost increases, and discovered the gap only when they needed to rebuild.

Myth 3: My Inflation Guard Endorsement Keeps My Coverage Current

Most homeowners policies include an inflation guard provision that automatically increases the dwelling coverage limit annually — typically by a percentage that approximates general inflation or construction cost inflation. The problem is that inflation guard percentages are set at inception and do not respond dynamically to the actual cost trajectory of local construction markets.

Construction input prices, according to the Bureau of Labor Statistics Producer Price Index, spiked well above general consumer inflation in the 2021 through 2023 period. A policy with a 4% annual inflation guard increase during a period when local construction costs rose 12% is falling behind by 8 percentage points per year. After three years, the gap between the inflation guard-adjusted limit and the actual rebuild cost can be substantial — and the homeowner who relies on the inflation guard without periodic independent review may not discover the gap until a loss reveals it.

Myth 4: The Gap Is Small Enough to Manage Out of Pocket

The average underinsurance gap is not a rounding error. Research following the Marshall Fire found an average underinsurance shortfall of $139,000 per household. At the high end of the market — the custom homes, renovated Colonials, and estate properties common in affluent suburban markets — the gap between an outdated dwelling limit and current rebuild cost can easily reach $200,000 to $400,000 or more.

Two policy features meaningfully reduce underinsurance risk without requiring the homeowner to perfectly predict future construction costs. Extended replacement cost endorsements provide a buffer of 20% to 50% above the stated dwelling limit, covering cost overruns that occur between loss and reconstruction. Guaranteed replacement cost coverage, where available from the carrier, covers the actual rebuild regardless of the stated limit. Both features deserve a conversation at policy renewal.

Tooher-Ferraris reviews dwelling coverage limits against current replacement cost estimates as part of every annual personal lines policy review. Learn more at https://toofer.com/home-insurance/ and https://toofer.com/private-client-group/.

The Insurance Information Institute publishes homeowners market data and replacement cost guidance at iii.org. BLS Producer Price Index data for construction inputs is available at bls.gov.

Frequently Asked Questions

How do I find out if my home is underinsured?

The most reliable method is to compare your current Coverage A dwelling limit against an updated replacement cost estimate that accounts for your home’s actual square footage, construction type, finish quality, and current local labor costs. Many carriers provide replacement cost estimator tools at no charge; independent appraisals from a certified appraiser or local contractor provide additional validation. Any significant renovation, addition, or improvement since the last estimate requires a new calculation.

What is the difference between market value and replacement cost for insurance purposes?

Market value is the price a buyer would pay for the property, including the land. Replacement cost is the expense of rebuilding the physical structure from the foundation up at current labor and material costs. For insurance purposes, the relevant number is replacement cost — land is not destroyed in a loss and is not what a homeowners policy covers. In most markets, replacement cost is significantly lower than market value, which means insuring at market value results in overcoverage on the structure and often inadequate coverage elsewhere.

Does an extended replacement cost endorsement eliminate the underinsurance risk?

An extended replacement cost endorsement significantly reduces but does not eliminate underinsurance risk. It provides a buffer of 20% to 50% above the stated dwelling limit, covering cost overruns that occur between a loss and the completion of reconstruction. It does not correct a fundamentally inadequate dwelling limit — if the Coverage A limit is set 40% below actual rebuild cost, a 25% extended replacement cost endorsement still leaves a gap. The endorsement works best as a buffer against post-disaster cost escalation, not as a substitute for maintaining an accurate base limit.

Ready to find out if your home coverage keeps up with what it would actually cost to rebuild? The team at Tooher-Ferraris has been helping homeowners protect their most valuable assets since 1932. Contact us today to schedule a no-obligation consultation — https://toofer.com/contact-us/

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  • Business Insurance

Directors and Officers Insurance for Private Companies: What Changed in 2026 and Why It Matters Now

Picture this: a mid-sized company has operated successfully for eleven years. A combination of rising input costs, a softening market for its services, and tighter credit conditions has created cash flow stress over the past eighteen months. The business continues operations, takes on additional working capital debt, and makes several asset dispositions to manage liquidity. Twelve months later, the business files for restructuring. The lender, facing a significant shortfall, files a breach of fiduciary duty claim against the company’s management team personally.

The company has general liability insurance. It has commercial property coverage. It has an employment practices liability policy. It does not have directors and officers insurance. The claim against management — for decisions made during a financially stressed period — has no insurance response. The individuals who served as directors and officers of that company are personally exposed.

This scenario is not hypothetical. It is the most common private company D&O claim type in the current market, and it is playing out with increasing frequency as rising operating costs and tighter credit conditions have stressed mid-market businesses across industries. D&O insurance for private companies has stabilized in pricing after years of market correction — and the three exposure forces driving private company D&O claims are more relevant in 2026 than at any point in the past decade.

The Three Private Company D&O Exposure Forces in 2026

Business insolvency risk is the primary driver of private company D&O claims in the current market. Lenders and creditors who face shortfalls on distressed loans consistently pursue directors and officers for breach of fiduciary duty, fraudulent conveyance, or mismanagement claims — particularly when the distress involved continued operations, asset dispositions, or debt incurrence that benefited equity holders at the expense of creditors. The claim does not require proof that management acted dishonestly. It requires only that a creditor can allege that management decisions during a financially stressed period were made in a manner that was not in the best interests of the company as a whole. In an insolvency context, that standard can be applied broadly.

AI governance exposure is an emerging but rapidly accelerating source of D&O liability. Directors and officers who approve the adoption of AI tools in hiring, performance management, compensation, or customer-facing decisions without establishing adequate governance oversight are accumulating personal exposure they may not recognize. The EEOC has made clear that “the algorithm did it” is not a valid defense — employers remain liable for disparate outcomes produced by AI tools they have adopted, regardless of whether the tool was purchased from a vendor. As class-action plaintiffs’ attorneys develop viable theories for algorithmic bias claims and regulators intensify scrutiny of AI governance, directors who cannot document adequate oversight of AI decisions face personal liability that their general liability and employment practices policies explicitly exclude.

Employment practices claims against individual officers remain the most frequent private company D&O trigger. Wrongful termination, discrimination, and retaliation claims that name individual officers and directors — rather than only the company as an entity — fall within the D&O coverage grant. Many businesses purchase employment practices liability insurance without D&O coverage, creating a gap precisely where the two coverages should overlap. An EPL policy covers the company’s liability for employment claims. A D&O policy covers the personal liability of the individuals named in those claims. When both the company and its officers are named as defendants, both policies need to be in place.

Why the Current Market Is a Favorable Entry Point

D&O insurance pricing peaked in 2021 and 2022 following a period of significant claims activity driven by securities class actions and SPACs. Since then, the market has corrected steadily. By early 2026, D&O has stabilized at flat renewals for most private company primary coverage, with some segments seeing modest reductions. For private companies that have never purchased D&O coverage and are entering the market for the first time, the current environment represents materially better pricing than was available two or three years ago.

The favorable entry point has a practical time limit. The insolvency risk exposure that is currently driving private company D&O claims reflects current economic conditions — tighter credit, higher operating costs, softening demand in several industries. If those conditions improve, the urgency of the insolvency risk exposure decreases. If they persist or worsen, D&O claims will continue to increase and underwriters will adjust their pricing accordingly. The window for entering the D&O market at stabilized pricing is now, not after the next wave of claims activity reprices the market.

What Private Company D&O Coverage Actually Provides

Private company D&O insurance is structured around three coverage components that address different aspects of the same underlying risk. Side A coverage protects directors and officers personally when the company cannot indemnify them — most commonly when the company is insolvent, when the claim involves a derivative suit, or when indemnification is legally prohibited. Side B coverage reimburses the company for amounts it pays to indemnify its directors and officers. Side C, or entity coverage, protects the company itself for certain claims.

For private companies, the most practically important component is Side A. When the business is solvent and capable of indemnifying its officers, Side B responds. When the business is in distress — precisely the scenario that generates the most frequent private company D&O claims — indemnification may be unavailable or prohibited, and Side A is the only coverage that protects the individuals personally exposed by the claim.

The commercial insurance team at Tooher-Ferraris helps mid-sized businesses evaluate D&O exposure, structure coverage that reflects their specific governance and ownership characteristics, and integrate D&O into a complete management liability program alongside employment practices liability and fiduciary liability coverage. Learn more at https://toofer.com/specialty-programs/ and https://toofer.com/commercial-insurance/.

Hinshaw and Culbertson’s 2026 D&O Liability and Coverage analysis provides detailed context on current private company D&O claim trends at hinshawlaw.com. The AM Best D&O market outlook is available at ambest.com.

Frequently Asked Questions

Do private companies really need D&O insurance?

Yes. Private company D&O exposure arises from the same types of governance and management decisions that generate public company D&O claims, but through different claim types: lender and creditor claims in distressed situations, employment practices claims naming individual officers, minority shareholder suits in closely held companies, vendor disputes alleging misrepresentation, and AI governance claims. None of these require the company to be publicly traded, and none are covered by general liability or employment practices liability policies alone.

When is the right time to buy D&O insurance?

D&O is a claims-made policy, meaning the policy in force when a claim is reported is the policy that responds. The right time to purchase D&O is before a claim arises — which means before a financial distress situation, before an employment dispute reaches the individual officer level, and before an AI governance incident generates regulatory scrutiny. Companies that purchase D&O after a distress event begins may find prior acts limitations or exclusions that significantly restrict coverage for the events that prompted the purchase.

How is D&O insurance different from general liability?

General liability insurance covers claims for bodily injury and property damage arising from business operations. D&O insurance covers claims arising from the management decisions and governance actions of directors and officers — breach of fiduciary duty, misrepresentation, mismanagement, and failure of oversight. These are entirely different categories of liability, and a business that carries only general liability has no insurance response to a D&O claim regardless of the size of its GL limits.

Ready to evaluate your directors and officers liability exposure? The team at Tooher-Ferraris has been helping businesses build complete management liability programs since 1932. Contact us today to schedule a no-obligation consultation — https://toofer.com/contact-us/

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  • Personal Lines

Life Insurance Awareness Month — The Coverage Gap That 102 Million Americans Are Living With

There are at least 102 million Americans living with a life insurance coverage gap, according to LIMRA and Life Happens. That number has declined modestly over the past several years as pandemic-era awareness drove more households to purchase coverage. The gap remains large. September is Life Insurance Awareness Month, and the most useful thing LIAM can do for any individual is move the conversation from general awareness to specific action — starting with an honest assessment of where their coverage actually stands.

The data on life insurance misconceptions is striking. Seven in ten Americans overestimate the actual cost of life insurance, according to the LIMRA and Life Happens 2024 Insurance Barometer Study. Only a quarter of consumers feel confident in their knowledge of the product. Purchase intent is high — 36% of US adults say they plan to buy coverage this year — and yet most do not follow through. The barriers are not financial. They are informational. People do not buy life insurance they believe they need because they do not know how much it costs, what type they need, or how much coverage is appropriate for their situation.

The Gap Between Perceived Need and Actual Coverage

Most households that are underinsured fall into one of three categories. The first group has no coverage at all: 49% of American adults own no individual life insurance policy, relying either on group coverage through an employer or on nothing. The second group has group coverage that is insufficient: employer-provided life insurance typically offers one to two times annual salary, which rarely reflects the full financial obligations of a household — mortgage balance, dependent care costs, business debt guarantees, or estate planning needs. The third group has individual coverage they purchased years ago that has not been reviewed since: a policy sized for a household that existed a decade ago, before income grew, before a business was acquired, before a spouse left the workforce to raise children.

The financial stakes of the gap are concrete. LIMRA research shows that 42% of households would face financial hardship within six months should a wage earner die unexpectedly, and 25% would face hardship within a month. These are not households without assets. They are households without the specific financial tool designed to protect those assets against the timing risk of an unexpected death.

What Life Insurance Awareness Month Should Actually Prompt You to Review

LIAM is most useful as a scheduling trigger, not an awareness exercise. For most households, the review that matters is not “do I have life insurance” but “does my life insurance reflect my current situation.” Five specific circumstances should prompt a coverage review regardless of whether September arrives first.

A change in business ownership or partnership structure is the most common trigger that goes unaddressed. Business owners who have added partners, restructured equity, taken on significant business debt, or changed the valuation of their company since their last coverage review are carrying life insurance designed for a different business. Key-person coverage, buy-sell funding, and loan collateral assignments all require periodic recalibration against current business realities.

A significant increase in net worth creates estate planning complexity that life insurance can address. An irrevocable life insurance trust can provide estate liquidity without the policy proceeds becoming part of the taxable estate — a strategy that becomes more valuable as the estate grows, not less.

A change in dependent status — children born, aging parents becoming financially dependent, a spouse transitioning out of the workforce — changes the income replacement calculation materially. Policies sized before those transitions are sized for the wrong household.

Why Cost Is Almost Never the Real Barrier

A healthy 35-year-old can purchase $500,000 in 20-year term life insurance for approximately $25 to $30 per month. That figure is meaningfully lower than most people estimate, and it is significantly lower than most people’s other recurring monthly financial commitments. The perception that life insurance is expensive is both pervasive and inaccurate, and it is the single most actionable misconception LIAM is designed to correct.

For business owners and high-net-worth individuals whose coverage needs are more complex, the cost calculation changes — but so does the sophistication of the planning tools available. Indexed universal life policies, split-dollar arrangements, and ILIT-held permanent coverage all offer financial planning benefits that extend well beyond pure income replacement. Understanding which tools are appropriate requires a planning conversation, not a price comparison.

Tooher-Ferraris works with individuals, families, and business owners to evaluate life insurance in the context of their complete financial and ownership picture. Learn more at https://toofer.com/life-insurance/ and https://toofer.com/private-client-group/.

LIMRA’s Life Insurance Awareness Month resources are available at limra.com. The 2026 Insurance Barometer Study, conducted by LIMRA and Life Happens, provides the most current data on US life insurance ownership and the coverage gap at lifehappens.org.

Frequently Asked Questions

What is the life insurance coverage gap?

The life insurance coverage gap refers to the difference between the amount of life insurance Americans have and the amount they need to maintain their households’ financial security in the event of an unexpected death. LIMRA and Life Happens estimate that at least 102 million Americans live with this gap, meaning their coverage is either insufficient or nonexistent relative to their actual financial obligations.

How much life insurance does the average person actually need?

A common starting point is 10 to 12 times annual income, but the right figure depends on specific obligations: mortgage balance, dependent care costs, business debt, estate tax exposure, and income replacement duration. Business owners often require coverage significantly above this threshold when key-person exposure, buy-sell funding obligations, and personal guarantees on business debt are factored in.

Why do so many people underestimate what life insurance costs?

According to LIMRA’s research, most people overestimate the cost of life insurance by a factor of three or more. A healthy 35-year-old can purchase substantial term coverage for roughly the cost of a streaming subscription. The perception of high cost is the primary reason people delay purchasing coverage they acknowledge they need — and it is the most common misconception LIAM campaigns are designed to correct.

Ready to find out where your life insurance coverage actually stands? The team at Tooher-Ferraris has been helping families and business owners protect their financial security since 1932. Contact us today to schedule a no-obligation consultation — https://toofer.com/contact-us/

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