2026 P&C Outlook: Navigating Volatility, Unlocking Growth

2026 P&C Outlook: Navigating Volatility, Unlocking Growth
January 30, 2026 17 mins

2026 P&C Outlook: Navigating Volatility, Unlocking Growth

2026 P&C Outlook: Navigating Volatility, Unlocking Growth

A dynamic and interconnected property & casualty risk landscape persists in 2026. However, the insurance market presents ample capacity and opportunities for buyers. Yet, increasing volatility means the window to build long-term resilience is time sensitive in advance of the next market turn.

Key Takeaways
  1. Increasing volatility is reshaping how P&C risk decisions are made, demanding a more integrated and forward‑looking approach from risk leaders and financial executives.
  2. Dynamic market conditions still offer meaningful opportunities for organizations to optimize programs, strengthen protection and rethink risk appetite through better insight.
  3. Data, analytics and a more connected risk operating model are essential to understanding exposure, assessing alternatives and building long‑term resilience.

Table of Contents

  1. Introduction

  2. Market Dynamics

  3. Escalating Liability Pressures

  4. Increasing Extreme Weather

  5. Rethinking the Risk Operating Model

Risk leaders and their organizations face a dynamic and rapidly evolving property & casualty (P&C) insurance environment in 2026, driven by shifting market conditions, competitive pressures and easing reinsurance market conditions. At the same time, rising loss severity and volatility, changing capital behavior and escalating liability pressures are redefining how organizations must think about risk. These forces demand a more integrated and strategic approach to protecting assets and creating value.

For proactive buyers, the current market offers meaningful opportunities to strengthen programs, optimize protection and make more informed decisions. But navigating today’s converging risks calls for decisive action, leveraging advanced analytics, innovative solutions and strong partnerships to build lasting resilience.

The speed and complexity of risk convergence further requires a new mindset. The predictable environments risk leaders once relied on have largely disappeared, replaced by persistent, interconnected and potentially severe volatility. As highlighted in Aon’s Global Risk Management Survey, organizations now need more connected, data‑driven approaches to understand exposure, evaluate options and respond with confidence.

The volatility we’re seeing now isn’t a temporary phase — it’s structural and baked into the system. Climate, liability pressures and economic shifts are creating a level of unpredictability that isn’t going to reverse. Organizations need to plan for volatility as a constant.

Trend 1: Market Dynamics – Act Decisively While Conditions are Favorable

After years of hard market conditions, P&C insurers’ profitability has improved due to retained earnings after two “banner” years, driving competition that results in improved pricing and terms for buyers. While some buyers are seeing more competitive terms or broader appetite from carriers, this is unfolding unevenly across lines and geographies — and remains highly sensitive to loss activity, capital behavior and economic pressures.

A deeper shift is also influencing market behavior. Volatility is now affecting pricing movements and carrier appetite in ways that make historical patterns less reliable. Shifting loss severity and greater unpredictability, capital sensitivity and liability pressures mean underwriting organizations need greater clarity on their "per risk" and portfolio exposure, stronger narratives for financial stakeholders, and more deliberate planning to achieve the outcomes they want and that are expected of them.

For prepared buyers, there is still scope to take advantage of favorable conditions, proactively reviewing their risk programs, negotiating better terms and securing coverage while the market remains receptive. By acting now, risk leaders can build resilience and position themselves for long-term success, even as market fundamentals continue to evolve.

“There is likely going to be a window of opportunity and not a prolonged soft market because the fundamentals of our business have not changed — we’ve seen a systemic change in loss activity, particularly with severity,” says Joe Peiser, CEO, Commercial Risk Solutions for Aon.

“Across the globe, we’re seeing losses become more unpredictable, especially from secondary perils. Flooding in places like Dubai, tornadoes moving closer to the U.S. East Coast, wildfires in Europe — these are extreme weather events that simply weren't on the radar a decade ago. Climate change is reshaping the pattern of risk, and that will inevitably drive market change,” he adds.

3 Strategies to Enhance Program Efficiency:
  • Position Risks Effectively

    Underwriters continue to differentiate, with preferred, well-managed risks experiencing the most favorable environment and outcomes. Organizations with strong risk profiles can negotiate better pricing, broader terms and higher limits.

    “Now is a good time to look at policy wordings to get optimal terms for your needs, where possible. We are seeing insurers taking defensive coverage positions particularly on larger, more complex claims, so ensuring you are comfortable with your policy wording can be critical before you have a claim. Also, meeting claims officers when you renew a program can be a very worthwhile investment of time. Finally, having a good broking advocate when you have a claim is essential,” says Mona Barnes, Global Chief Claims Officer for Aon.

  • Diversify and Right-Size Programs

    There is still room for buyers to right-size their programs, explore multiple-year agreements and diversify their carrier panels.

    “We continue to discuss alternative structures, pursue multi-line relationships, and seek long-term agreements where it makes sense for clients who value locking in favorable terms and hedging against a potential market shift,” says Peter Tavella, Chief Broking Officer, Property for Aon in North America. “Spreading risk across multiple carriers reduces dependency on any single carrier and improves negotiating power during renewals. This approach also enhances coverage breadth.”

  • Build Value with Risk Capital Approach

    Integrating traditional risk transfer with alternative risk capital solutions — including reinsurance, structured solutions, parametric, captives and insurance-linked securities (ILS) — can improve cost efficiency, broaden access to capital and help tailor programs to emerging risk profiles.

    “Cat bonds and ILS become applicable to clients with large exposures, where there simply is not enough insurance capacity available and you need to tap into non-traditional markets,” adds Peiser.

How Aon can Help
  • Deep market and sector intelligence and relationships to secure optimal terms and innovative structures
  • Advanced analytics and benchmarking to present risks credibly
  • Experience across alternative risk transfer and multi‑year structures
  • Strategic guidance on program design, valuations, wordings and capital efficiency
Quote icon

We’re creating real value by closing the loop between broking and claims — identifying the clauses that cause friction and pushing fixes upstream. It’s not just about price; it’s about certainty, clarity and making sure coverage performs exactly as intended.

Cynthia Beveridge
Global Chief Broking Officer, Commercial Risk Solutions

Trend 2: Escalating Liability Pressures and Litigation Abuse

Liability pressures in the U.S. continue to intensify across the P&C market, with the rise of litigation abuse — driven by increasingly organized plaintiff activity, growing litigation funding and rising defense and claims costs — reshaping the casualty environment.

Nuclear verdicts (identified as awards greater than $10 million), broader liability exposure and escalating severity are affecting availability, pricing and attachment points in the U.S. and emerging signals in other regions.

As Matthew Hannon, National Casualty Practice Leader for Aon in North America, observes, this is no longer simply “social inflation” — it is a systemic shift in how liability is prosecuted and capitalized on, creating persistent issues for buyers.

“We’re actually pivoting from social inflation to litigation abuse. It’s creating significant headwinds in the casualty space, specifically as it relates to the lead umbrella and excess lines of coverage. We’re seeing larger claims, and in the absence of tort reform, we are going to continue to see these large verdicts,” he says.

The impacts reach beyond traditionally high‑risk sectors. As Peiser notes, “Severe single‑plaintiff liability events can now affect organizations of every size and sector. What once felt isolated to a handful of high‑risk industries has become a universal exposure — any company can suddenly be facing a multi‑million‑dollar verdict. That shift is systemic, and it’s reshaping how all buyers need to think about casualty risk.”

Casualty Market Headwinds

  • 116%

    Nuclear verdicts increase in cost, 2023-2024

    Source: Marathon Strategies: Corporate Verdicts Go Thermonuclear, 2025

  • $10M

    Average lead limit deployed by umbrella carriers vs. $20 million in 2019

    Source: Aon data

  • $98M

    Median verdict for top U.S. casualty verdicts in 2024, up from $49.7 million in 2019

    Source: Aon data

  • $5M+

    Increase in auto liability single plaintiff outcomes, putting pressure on structure, attachment points and pricing

    Source: Aon data

In 2024, general liability and commercial auto nuclear verdicts rose by 52%, while total awards more than doubled.1 Growing claims inflation impacts the economy, increasing costs of everyday items, including food, housing and medical care.

Rates are climbing. General liability rates in the U.S. rose 5.6% in Q4 2025 and are forecast to climb up to 9% in Q1 2026. Auto liability rate increases are higher — up 9.2% in Q4 2025 and forecast to rise 7% to 15% in Q1 2026, according to Aon data.

While the pressure is most acute in the U.S., other regions are feeling the effects:

Europe, the Middle East and Africa (EMEA) is seeing increasing litigation‑funding activity and new regulatory frameworks that allow class actions for the first time. “Social inflation remains primarily a U.S. problem, however, we are seeing more litigation funding activity in Europe than ever before,” Barnes adds. “The other dynamic in the European Union is regulation (e.g., the EU's Representative Actions Directive, the new Product Liability Directive, AI Act) that recognizes class actions, which have never been allowed in Europe historically.”

Erlantz Urbieta, Chief Broking Officer for Aon in EMEA adds: “EMEA clients with U.S. operations have also been impacted by U.S. liability trends and need to rethink their liability protection and programs to adapt to changing exposures. We are helping organizations with analytics, and more adequate protection against this increased exposure.”

The Asia-Pacific (APAC) region shows a wide variation in liability pressures. Terence Williams, Head of Commercial Risk Solutions for Aon in APAC, stresses the importance of viewing Asia and the Pacific separately. Australia in the Pacific region, has seen a sharp rise in class‑action activity — with around 1,000 cases currently before the courts and roughly one new filing each week, according to Aon data — while most Asian markets experience far lower levels of litigation exposure. According to Williams: "A nuclear-verdict culture does not exist much in Asia, nonetheless, underlying cost pressures are rising and already influencing claims outcomes."

While APAC — both Asia and Pacific regions — does not face systemic litigation risk like the U.S. or new EU directives, inflationary pressures are widespread. Costs are going up everywhere — treatment, materials, repairs — and that drives claims severity even without the U.S.‑style verdict environment,” Williams says.

4 Strategies to Mitigate Social Inflation’s Impact
  • Consider Multi-Year Casualty and Structured Risk Solutions

    Multi-year casualty insurance programs provide pricing stability and protection against volatile market swings, incorporating mechanisms such as corridors, loss-sensitive premiums and aggregated cover.

  • Incorporate Proactive Claims Management

    Rapid triage and early decision making can prevent claims from “aging,” which often drives higher severity. Strong broker–claims collaboration is key.

  • Use Data and Scenario Modeling to Assess Exposure

    Tools like Aon’s Casualty Risk Analyzer help organizations understand their true exposure, align limits to risk, evaluate retention strategies and support C‑suite conversations.

  • Review Terms, Attachments and Exclusions Carefully

    Work with your broker to review program design and efficiency, with a focus on terms, deductibles, attachment points and limits to help prevent programs from becoming unsustainable as loss costs increase.

How Aon can Help
  • Global legal and claims expertise to help mitigate and manage liability risk
  • Innovative use of captives and alternative structures to fill gaps and control costs
  • Industry‑leading analytics to inform limit adequacy, program design and capital efficiency
  • Advocacy for legal reform and ability to connect clients with a network of tort reform advocacy groups 

Trend 3: Extreme Weather Events Increase in Frequency and Severity

In 2026, the most disruptive feature of climate risk isn’t just its severity — it’s the growing unpredictability of how and where events strike. Extreme weather is becoming harder to anticipate, harder to price and harder to model, reshaping how underwriters manage portfolios and deploy limits, and how risk leaders think about resilience.

Climate volatility, led by catastrophic wildfires, severe convective storms (SCS), windstorms, flooding and drought, is now a top concern for organizations globally, impacting business interruption and long-term resilience. While insurance capacity remains strong, local cracks are emerging.

Aon’s 2025 Global Risk Management Survey confirms that climate change and natural disasters are already among the most material risks for leaders — and climate change is expected to enter the top 10 by 2028. This reflects not only escalating severity, but also the expanding footprint of climate‑driven events.

Secondary perils — including SCS, floods and wildfires — continue to outpace primary perils such as hurricanes and earthquakes. In 2025, secondary perils accounted for $186 billion of the total $258 billion in global economic losses and $111 billion of global insured losses of $125 billion, according to Aon’s 2026 Climate Catastrophe Insight.

“Climate change isn’t a single story — it plays out differently in every region,” says Williams. “But what’s universal is that its impact is sharper, harder to predict and it’s rewriting the risk conversation. It’s forcing us to rethink modeling, resilience and supply chain continuity. The time for clients to act isn’t tomorrow — it’s now.”

This effect is visible globally:

  • Europe is experiencing atypical wildfire and flood events in regions traditionally considered low‑risk.
  • Asia is seeing rising flood and storm losses compounded by gaps in modeling and protection infrastructure.
  • Australia and New Zealand are facing increasingly severe wildfire, flood and storm cycles — requiring more sophisticated valuations, loss prevention and alternative solutions.

Barnes highlights the growing unpredictability: “We’re seeing more nat-cats in unusual areas, which is so unexpected. Weather is impacting regions much more than it ever has, and that has real implications for coverage, valuations and resilience.”

Growth of Secondary Perils

  • $186B

    Global economic losses from SCS, wildfire and flooding

    Source: Aon’s 2026 Climate Catastrophe Insight

  • $60B

    Global insurance losses from SCS, the third highest on record

  • $58B

    Economic losses from Palisades and Eaton Fires

4 Strategies to Help Build Nat-Cat Resilience
  • Diversify program with alternative risk transfer

    Use alternative risk transfer (ART) structures to match capital to risk and complement the property insurance portfolio. ART structures like parametric, structured solutions, captives and facultative reinsurance, fuel competition and fill protection gaps. Further, tap into new pools of capital to push out predatory and opportunistic capacity.

    Globally, parametric cover is developing as a strong nat-cat solution. The benefits of parametric provide a compelling and unique solution in cat-prone areas where capacity and terms may be restricted.

  • Use data and alternative solutions to drive better decisions

    Natural catastrophe and climate analytics can help companies shape decision making around the issue of weather and climate risk, enabling them to develop strategies to close the protection gap, understand regulatory changes and unlock new sources of risk capital.

  • Reinvest savings to improve your program

    The soft market has been a boost to many risk management budgets. Invest those savings in risk improvement, loss control and valuation projects to build resilience and differentiate your risk in the market.

  • Review asset valuations

    Accurate asset valuations prevent underinsurance and significant financial losses. Provide up-to-date valuations, risk mitigation strategies and historical data to differentiate your risk. Maintain due diligence on your reported values to not only manage your firm’s exposure but also make sure you’re not under or over-reporting values.

How Aon can Help
  • Advanced analytics to help clients demonstrate resilience and unlock better pricing
  • Experience in alternative risk transfer and innovative solutions for hard-to-insure risks
  • Support with valuations, risk engineering and loss‑prevention strategy
  • Advocacy and partnership with insurers and regulators to maintain market stability and expand access to coverage

Trend 4: Rethinking the Risk Decision Model

As risks become more interconnected, volatile and harder to forecast, traditional operating models — built around siloed product lines, annual renewals and predictable market cycles — no longer reflect the reality organizations face. Structural volatility across climate, liability and capital markets is forcing risk leaders to rethink how decisions are made, how data is connected and how risk capital is deployed.

As a result, more businesses are increasingly retaining risk, especially at lower tower levels, and seeking aggregate, multi-line, multi-year stop loss solutions — particularly around captives — to manage volatility and optimize capital over time.

“Risk leaders can only optimize risk financing effectively if they look at their whole portfolio of risk — not just product line by product line,” adds Peiser. “Unfortunately, the risk transfer industry is still largely organized by product line, so leaders need to do both.”

This evolution is also accelerating the adoption of alternative capital. A risk capital strategy, driven by data and analytics, blends traditional risk transfer with alternatives like reinsurance, structured solutions, parametric, captives and insurance-linked securities. These alternative risk transfer methods give companies direct access to various forms of capital, that previously were only accessible as reinsurance, if at all. This enables cost savings and tailored risk management that balances risk transfer, retention and alternative solutions.

“A balanced approach between traditional markets and alternative capital provides a good diversification, dictated by client exposure, program characteristics and risk appetite,” says Vincent Flood, Head of Property for Aon in North America. “In our experience, clients who implemented our risk capital strategy have outperformed the market by 10-20%.”

The demands on risk leaders are also expanding. Boards and C‑suites now expect clearer quantification of risk, stronger scenario modeling and more transparent articulation of capital deployment and resilience. This requires analytical models and strategies that integrate data, analytics, risk engineering and program design — and that keep options alive year‑round, not just at renewal.

Beveridge emphasizes the need for continuous advisory and cross‑functional collaboration: “Clients need support throughout the year — not just at renewal. Strategic sessions keep options active and ensure programs evolve rather than being put to bed.”

6 Actions to Maximize Risk Capital Value

  • 01
    View Risk Management as a Strategic Asset

    Use alternative, non-traditional risk transfer methods to help manage volatility and unlock access to strategic sources of capital. The best results come from integrating traditional insurance with alternative risk transfer solutions.

  • 03
    Foster a Risk-Aware Culture

    Build enterprise-wide visibility and a risk-aware culture to gain resilience and close coverage gaps. Explore new risk management strategies and invest in education to build a comprehensive understanding of risk capital dynamics and risk maturity.

  • 04
    Put Data and Analytics to Work

    Focus on use of quantitative analytics to develop and implement proactive and long-term market and risk strategies to build resilience against future uncertainties.

  • 05
    Reinvest Premium Savings

    Use the current market to reinvest premium savings into underinsured risks and resilience-building measures — engineering projects, climate initiatives and other risk mitigation strategies. Prioritize investments that address your business’ specific risk exposures and long-term goals.

  • 06
    Involve the Right Broker

    Talk to a risk advisor who uses risk analytics and modeling to help build a strategy that not only manages property and casualty risks but also builds long-term resilience.

How Aon can Help
  • Leadership in holistic risk operating model design, integrating enterprise risk management, analytics and alternative risk transfer
  • Proprietary tools and benchmarking to optimize total cost of risk and coverage allocation
  • Deep experience in captive formation, parametric solutions, and crossline risk integration
Aon’s Thought Leaders

Joe Peiser
Chief Executive Officer, Commercial Risk Solutions

Mona Barnes
Global Chief Claims Officer, Commercial Risk Solutions

Cynthia Beveridge
Global Chief Broking Officer, Commercial Risk Solutions

Vincent Flood
U.S. National Property Practice Leader, North America

Stephen Hackenburg
Property and Casualty Leader, North America

Matthew Hannon
U.S. National Casualty Practice Leader, North America

Peter Tavella
Chief Broking Officer, National Property, North America

Erlantz Urbieta
Chief Broking Officer, Europe, Middle East and Africa

Terence Williams
Head of Commercial Risk Solutions, Asia Pacific

1 Corporate Verdicts Go Thermonuclear, Marathon Strategies

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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