It’s a buyer’s market out there for commercial insurance. Not only is it getting cheaper across much of the market, it is also getting more easily available.
Property rates fell globally by 12% while cyber rates fell 4% for their twelfth consecutive quarterly decline. In total, according to Marsh, global commercial insurance rates dropped 6% in the second quarter of 2026, continuing a marathon decline of eight consecutive quarters. Marsh is one of the world’s largest commercial insurance brokers and risk advisers, so its quarterly data provides a useful look at what large corporate buyers are seeing in the market. This marks an environment where, in many markets, fierce competition has brought more buyer-friendly terms, broader coverage, and lower deductibles.
There has been one area moving increasingly in the opposite direction: casualty, specifically U.S. casualty. Marsh stated that rates rose 7% during the same quarter, with U.S.-exposed risks facing greater underwriting scrutiny and more selective capacity. Similarly, Aon, another of the world’s largest insurance brokers and risk advisers, has reported that even though broader coverage is becoming more easily available across much of the market, casualty insurers continue imposing exclusions or tighter restrictions for liabilities including PFAS, biometric information, and other data-privacy exposures.
Before we get too deep into the insurance weeds, let’s lay out why this is a curious development.
The contradiction in rates is interesting because it shows that insurance can become cheaper overall while specific liabilities become increasingly difficult to transfer. The why, and especially which liabilities begin falling into that bucket with wider market effects, is where there may be fertile ground for investors.
There have always been insurers who disagree about which risks are worth covering. That is partly why competition remains so vibrant. But what happens, and more importantly when does it happen, when several large insurers or the market in general begin reaching roughly the same conclusion, particularly around liabilities that can generate claims across large groups of customers or plaintiffs?
What to Watch
If you’ve been keeping up with the latest PFAS litigation, it may give us the clearest modern example of what happens when this trend reaches maturity.
When insurers began restricting coverage, the litigation was already massive, so exclusions did not predict the problem. It made sense that insurers would be reluctant to carry future liability that was growing so rapidly and remained difficult to cap.
One Marsh case study involved a water utility facing a choice between preserving a potential PFAS claim under its existing policy and accepting an exclusion going forward, or taking only $5 million of affirmative PFAS coverage under the new policy. The utility was ultimately able to secure separate pollution coverage, which is an important distinction. PFAS has not simply become uninsurable. Rather, coverage has increasingly moved toward exclusions, lower limits, higher retentions, or more specialized policies.
Another example can be seen in biometric liability, which appears to be somewhat earlier in the same progression. Aon has identified biometric and data-privacy risk as categories where casualty insurers are imposing restrictions even while coverage has become more competitive in other areas.
Earlier still may be generative AI.
ISO has already introduced generative-AI exclusionary forms for commercial liability policies. ISO, or Insurance Services Office, is part of Verisk and develops standardized insurance policy forms and endorsements that carriers can choose to adopt. Insurers have started filing with state regulators so they can use these forms. Investors will have to monitor whether larger insurers actually begin using them in meaningful numbers and whether competitors follow.
One carrier excluding an emerging liability can credibly be called an underwriting decision. But when the industry at large moves largely in one direction, it may be coalescing around something closer to a market judgment.
Why Investors Should Care
The reason investors should care about this phenomenon is that public markets and insurers often look at emerging liability differently.
From a risk standpoint, an equity analyst may look at one company and dig into the mechanics of the lawsuit, the practical damage from a large settlement or verdict, or whether the legal theory is material to that particular business.
The insurer has to look across an entire book of business and determine whether similar risk theories are appearing across many insured companies simultaneously.
That difference matters when the liability is repeatable.
A pesticide formulation used throughout agriculture, a biometric system used across thousands of workers, or an AI platform deployed across millions of users can create something very different from an isolated accident.
If insurers begin reacting to an underlying pattern of conduct that produces similar claims across many companies or customers, they may change terms before the effect is obvious in the earnings of any one public or private company.
An insurer may not be able to predict the future, but when the industry starts treating a certain risk as a category of its own, it may be a useful signal for investors deciding how much weight to give that risk in a company’s valuation.
The more interesting investor exercise may therefore be looking beyond the company currently getting sued.
If insurers begin backing away from PFAS, biometric, AI, or another category of liability in large numbers, the useful question may be which other public companies carry the same exposure before that exposure becomes obvious in their earnings.
Who Is Exposed
Companies that should be most wary are those where the underinsured portion of a liability could become large relative to the company’s cash flow or liquidity.
Most of the behemoths in the public markets may be able to absorb tens of millions of dollars in additional risk without changing much. A smaller company may not have that same luxury.
However, even big businesses with highly standardized exposure and interactions with enormous numbers of people may still be at risk if the same conduct is used repeatedly across a large population and one legal theory can create similar claims rather than one isolated loss.
The combination worth watching is fairly simple: a potentially repeatable legal liability and a shrinking ability to transfer that liability elsewhere.
Signals to Watch
The first signal is if the insurance industry begins flagging an exclusionary clause for a certain type of liability.
Sporadic exclusions are not enough. Several major carriers would need to start using similar language, followed by smaller competitors who refuse to undercut those terms simply to gain business.
Broker language is another useful signal. There is a difference between Marsh or Aon saying insurers are scrutinizing a liability and saying restrictions or exclusions have become common, widespread, or standard.
Smaller sublimits and higher retentions are also pertinent. A company may have to take out individualized specialty insurance or choose to retain more of that risk itself. A company does not have to become completely underinsured before the baseline economics begin changing on the balance sheet.
Company disclosures are always wonderful resources. It would be worth looking for changes from the usual generic warnings that insurance may not cover every loss toward language that specifically identifies a new liability, higher retentions, exclusions, or difficulty obtaining preferred limits.
Why This May Stop Here
For the categories discussed today, this may simply be a temporary retreat from risk with insurers later returning.
For instance, insurers got spooked when they took large losses from ransomware in the cyber market. Gradually underwriting improved, more capacity entered the market, and over time pricing became competitive again. Marsh reported that global cyber rates fell another 4% in the second quarter of 2026.
AI may follow a similar trajectory, with current exclusions simply reflecting the current air of fear and uncertainty.
What is excluded should not be treated as a prediction. It may be more useful as an additional variable showing when the insurance market begins reaching the same conclusion at scale.
Bottom Line
It is always interesting to identify more variables that can give you an indication as to how the market feels about a certain liability or legal risk. Sometimes it is not only the litigation and cases themselves, but how other people with money at risk begin reacting to that litigation, that matters.
Public markets usually analyze litigation company by company and may dig deeply into one lawsuit or one defendant. Insurers are instead focused on risk across an entire book of business and are forced to decide whether they still want to absorb that same type of risk at a certain baseline.
That creates a useful second signal for investors.
If insurers begin backing away from a particular category of liability in large numbers, the useful question may not be whether the company currently in the headlines is already doomed. It may be which other public companies carry the same exposure, how repeatable that exposure is, and whether those companies could absorb more of the loss if insurance becomes harder to obtain.
The exclusion itself is not the prediction. The possible signal is when large parts of the insurance market begin treating the same legal risk differently.
By the time that risk is obvious in one company’s earnings, the change in how insurers view it may have already been visible elsewhere.
Editorial note: Laws of Capital analyzes litigation, regulation, settlements, and commercial incentives using publicly available information. Research, drafting, and editing may be assisted by AI and other research tools; all published analysis is reviewed and edited by Laws of Capital. Any stated probability or confidence level applies only to the scenario described and may change as new facts emerge. Nothing here is a prediction of share price, financial performance, transaction outcome, or final legal result, and nothing is legal, financial, or investment advice or a recommendation to buy, sell, hold, or trade any security.