Navigating Generational and Technological Change

The U.S. Lawyers Professional Liability (LPL) insurance market remains stable and attractive for law firms of all sizes, including both regional firms (under 200 attorneys) and larger national firms (over 200 attorneys). Insurers continue to demonstrate a strong commitment to this class of business, with Aon introducing new carriers and expanding market options for our law firm clients.

2025 Macro Industry Trends and Risks

One of the most significant trends in 2025 is the increase in law firm mergers and acquisitions. Firms of all sizes — from boutique practices to global organizations — are consolidating to expand their geographic reach, enhance specialty offerings and achieve operational efficiencies. This consolidation is reshaping the legal landscape, requiring firms to focus on careful integration and strategic planning, especially around insurance coverage for legacy liabilities.

AI is another area of focus, with law firms rapidly adopting both external and internal AI tools to meet client demands and improve operational efficiency. While AI offers substantial benefits, firms must remain vigilant about confidentiality and data security, particularly when handling sensitive client information. Closed systems and robust risk management protocols are essential to mitigate exposure.

Geopolitical uncertainty continues to influence the legal sector, with U.S.-based firms navigating an evolving regulatory and trade environment. Law firms play a crucial role in advising clients on these developments while also managing internal risks associated with shifting policies and global events.

Policy Wording/Coverages

Coverage across the LPL market remains consistent and stable. Aon continues to negotiate broad form coverage that adapts to the evolving legal and regulatory environment. Regional law firms are benefiting from enhanced policy terms as insurers broaden their appetite and seek to attract new business. Firms participating in Aon’s risk purchasing groups also leverage collective bargaining power to secure competitive and comprehensive coverage.

One important consideration, especially for firms undergoing mergers or dissolution, is the extended reporting period (ERP), commonly known as “tail coverage.” ERP protects against claims that arise from work performed prior to a merger or closure, which can occur years after the original incident. The appropriate ERP length depends on the firm’s historical claims experience, practice areas, and statutory requirements. Firms handling complex litigation or long-tail matters (e.g. Trust & Estates) may require longer ERPs to ensure ongoing protection.

Retentions

Retentions remain flat and represent a small percentage of law firm revenue for most firms. While insurers have occasionally discussed increasing retentions, especially for firms with adverse claims experience or significant structural changes, the market has largely maintained current retention structures. When retentions do increase, it is typically to offset premium hikes or reflect changes in a firm’s risk profile.

Capacity

The LPL market continues to offer ample capacity across U.S., London/European, and Bermuda platforms. Insurers in these regions remain committed to supporting the legal sector, acting as both lead carriers and providing ventilated capacity at various program attachment points. Bermuda carriers, though managing capacity down from the larger limits seen in the mid-2000s, still play a vital role in large placements.

In 2025, Aon introduced new capacity in all major markets, further strengthening options for law firms seeking high limits or complex coverage structures. A growing number of Aon-insured firms are turning to the Aon Client Treaty of Lloyd’s Syndicates, our exclusive data-backed London facility, to secure the high levels of coverage they need at competitive pricing.

Rates/Premiums

Rates and premiums in the LPL market vary by firm size, practice areas and claims experience. Regional firms are currently benefiting from intense competition, with many carriers offering flat renewals or even year-over-year premium reductions. This trend is especially pronounced for firms with clean claims histories and robust risk management practices. Larger national firms are seeing modest increases on primary layers, particularly through the first $100 million in coverage.

However, the landscape is shifting as “1 in 100-year” claims — large, infrequent, but severe losses — are occurring with greater frequency. Insurers are reviewing pricing models to ensure long-term sustainability and reflect the new risk environment. Excess layers may see high-single to double-digit percentage increases. Overall, cost predictability and value remain strong for most buyers, but proactive risk management is essential to maintain favorable terms.

Claims

Claims activity, especially in the large firm law sector, continues to be characterized by both frequency and severity. The rising cost of defense is a main driver of increased claim costs and quick settlements. Many firms find that settling early is more cost-effective than incurring substantial expenses with a trial. While no single practice area dominates, claims involving mistakes made in corporate transactions tend to move quickly and carry the highest financial impact. Regional firms have especially benefited from relatively minimal claims activity, contributing to the competitive market environment.

2026 Predictions

Looking ahead to 2026, further merger and acquisition activity is anticipated as law firms continue to pursue scale, efficiency and broader service offerings. The pressure to differentiate through expanded capacity and geographic reach will intensify, especially among larger firms. Successfully managing integration and cultural fit will be vital for new entities, as will reviewing insurance coverage to ensure protection against both pre- and post-close claim matters.

Insurers are expected to maintain a disciplined approach to capacity management while seeking premium increases where warranted. Portfolio diversification — spreading risk among firms of different sizes and attachment points — will become a greater focus.

New carriers will continue to enter the market, and, combined with Aon’s market reach and Aon Client Treaty offering, Aon’s law firm clients will have access to significant LPL limits and innovative solutions. Proactive risk management, data driven placement strategies and close broker consultation will remain key to maximizing coverage value and navigating the evolving landscape.

Overall, the Accountants’ Professional Liability (APL) insurance market was relatively stable in 2025. From an insurance risk perspective, there is a focus on attest and fraud which continue to be the areas of most concern to APL insurers.

Policy Wording/Coverages

APL insurers continue to offer broad coverage to U.S. national and regional accounting firms.

Retentions

Retentions are moderately increasing in the U.S. APL market, as insurers respond to firm revenue growth and adverse claims activity. Firms with favorable claims experience can benefit from some premium savings with increased retentions.

Capacity

APL market capacity continues to be stable. While a handful of insurers exited from the APL market this year, new and renewed capacity via London and Bermuda insurers has both filled the void left by exits and met the need for additional capacity.

Insurers continue to manage capacity on a single risk with quota share structures and ventilated layers. Global insurers continue to monitor limits deployed on a single risk via various access points (U.S., UK, Bermuda).

Rates/Pricing

Pricing remained relatively stable. Depending on the commercial insurance attachment point, firms with favorable claims experience have seen renewals with flat premiums or rate decreases. Firms with lower retentions or less favorable claims experience have seen single digit rate increases.

Excess insurers generally follow the underlying rate change with some exceptions, such as when insurers deem that pricing has been inadequate for years or the firm has significant year-over-year growth.

Rates/Claims

The severity of claims in the U.S. APL market remains relatively stable. Insurers remain concerned about rising defense costs and the increase in litigation funding.

Final Thoughts

Accounting firms continue to experience opportunities and challenges on a variety of fronts:

• AI
  • Implementing use within the firm
  • Delivering value to clients
• Continued buildouts of offshoring operations
• The decreasing number of CPAs entering the profession
• The threat of data breaches
• Evolving needs of clients

Private equity interest in the accounting profession remains strong as ever and the size of M&A/transactions continues to rise.

Predictions for 2026

• “Rollover” of initial private equity investments in firms will occur
• Trend of larger Mergers & Acquisitions deals will continue
• Twenty firms over $1 billion will emerge by the end of the year

The Consultants’ Professional Liability (CPL) insurance market remains stable for large national and global consulting firms headquartered in North America. This year, CPL insurance market conditions are favorable for risks with no adverse loss activity. Those consulting firms with severe losses may experience constrained market conditions.

From an insurance perspective, use of AI, public-sector consulting work, and employee reductions in force will continue to be of top concern for CPL insurers.

2025 Macro Industry Trends and Risks

Market Headwinds

We saw a slowdown in consulting services in 2024, and this trend is continuing in 2025.

Layoffs/Reductions in Force

As a result of market headwinds, consulting firms are right sizing their workforce to more closely align with observed market realities, with layoffs and strategic reductions in force in 2024 and 2025.

AI

Consulting firms continue to develop and use AI to augment their service offerings to clients, including expanding their AI capabilities by entering strategic partnerships.

Tariffs

Tariffs were an emerging trend this year. While U.S. imposed tariffs may create an increased demand for services in some industries, it may also raise the costs of doing business for some firms, potentially impacting their overall spend for consulting services.

Policy Wording/Coverages

Coverage has been consistent and stable in 2025. Obtaining coverage enhancements is possible but insurers will be selective and may push back on multiple coverage requests. Broad form coverage is available in the current commercial marketplace, subject to adequacy of retention and pricing.

Retentions

Retentions continue to be flat. However, firms with deteriorating loss histories may face higher than average retentions. As part of the insurance renewal cycle, professional liability insurers will review the adequacy of retentions considering any material exposure changes, e.g. headcount and revenue growth, acquisitional activity and/or adverse claim development, etc.

Capacity

There is plenty of capacity available in the U.S. and London/Europe on a primary and excess basis and Bermuda on a high excess basis, depending on the risk exposure of the firm. Insurers continue to be diligent about managing deployment of limits on any one risk across their multiple platforms in the U.S., UK and Bermuda.

New insurers entered the commercial insurance market in 2024 and 2025 seeking to write excess CPL insurance. This created additional capacity for firms with no adverse loss activity seeking to increase their limits.

Rates/Prices

Premium rates in the CPL market have been stable in 2025. Depending on the risk profile of the buyer, primary pricing is flat to +5%. Excess pricing is generally following the underlying primary pricing. Excess insurers continue to seek to maintain consistent ILFs on placements. Firms with a clean loss history and moderate revenue growth on average saw flat to +3% pricing for all insurance layers.

Claims

Severe publicly known CPL claims have stabilized but the severity trend is up. Defense costs continue to rise, especially for complex litigation. Insurers are mindful of recent severe claims and continue to monitor certain exposures, such as IT consulting, including large software implementation and development projects, and public sector work, both in the U.S. and abroad.

2026 Predictions

Barring any recessionary and/or inflationary flareups in North America in 2026, we foresee that the Consultants’ Professional Liability market will continue to be stable, particularly from a capacity, retention and rate perspective. Insurance market conditions will continue to be favorable for clean consulting professional liability risks.

We predict the following consulting firm risk trends for 2026:

• Development and use of AI will continue to explode.
  
  
• Geopolitical uncertainties and tariffs may continue to influence client spending on consulting services.
  
  
• High turnover and burnout risk may develop due to demanding workloads, potentially leading to employee retention challenges.
  
  
• Clients will continue to demand more value for money, thus creating an uncertain and highly competitive market.
  
  

In Aon’s 2025 Global Risk Management survey, Cyber Risk tops the global risk agenda both for professional service firms and across all sectors. It is forecast to retain the number one position through to 2028.

In 2024 PSP highlighted that professional service firms were a favored target in the continuing growth of ransomware attacks.

There has been good news in the cyber world since then:

• The premium corrections of 2020 through 2022 proved to be sufficient to put insurers back into profitability and premiums have continued to moderate against a background of plentiful capacity.
  
  
• Several major threat actor groups have been disrupted including Lockbit, BlackSuit and BlackCat.
  
  
• Ransomware payments have reportedly been declining with fewer victims opting to pay, although ransomware is still on an upward trend with many new groups emerging.
  
  

However, as we discuss in Cyber October 2025 – Good News Tempered by a Dynamic Threat Environment for Professional Service Firms, creative and determined threat actors have shaped a dynamic cyber risk environment in which professional service firms will continue to be targeted.

Some major trends and implications for professional service firms are reviewed in Aon Insights:

• Aon Global 2025 Cyber Risk Report – Based on Aon’s extensive data and analytics from our client base, this report reviews the trends shaping the current cyber insurance market.
  
  
• Insider Threat – Costly insider threats are a growing challenge for professional service firms.
  
  
• Social Engineering Attacks – Social engineering fraud (SEF) and Business Email Compromise (BEC) remains a major risk for professional service firms.
  
  
• Data Governance – Active governance of the valuable and often personal data held by professional service firms is vital in managing cyber risk.
  
  

State of the Cyber Market for Professional Service Firms

• Capacity is widely available with more competition on an excess basis. Firms are actively increasing limits.
  
  
• Coverage is evolving – War Exclusions, State Sponsored Attacks and Widespread events are all issues that insurers are monitoring.
  
  
• Ransomware continues to be a concern of insurers. Data breaches and class actions are also becoming more concerning.
  
  
• Retentions stabilized after adjusting to market wide claims activity.
  
  
• Rates/Pricing continue to see pressure on primary premium sustainability but not at the same pace that we witnessed between 2019 and 2022; heightened competition in the excess market has resulted in reductions.
  
  

Throughout 2025, our strategic emphasis on industry differentiation has allowed us to negotiate below-market rates for professional service firms. This disciplined approach to risk placement has helped keep our clients’ total cost of risk stable, even as market conditions continue to evolve.

Property Insurance

Properties located in regions with minimal catastrophe exposure have generally experienced stable rates year-over-year. In contrast, locations situated in high-risk areas — particularly those vulnerable to hurricanes — continue to encounter upward pressure on premiums. For these locations, rate increases can reach as high as 10%, driven by insurers' cautious approach, which also includes reduced capacity and/or higher deductibles.

Casualty Insurance

General Liability: Rates are rising modestly (3%–10%), though coverage terms remain consistent.

Auto Liability: Continued upward pressure, with increases between 5%–25%, driven by claim frequency and severity.

Umbrella/Excess Liability: Still the most challenging segment, with rate hikes up to 35%, driven by increases in underlying pricing, social inflation, nuclear verdicts, and reinsurance costs. Early engagement with brokers is key to managing capacity and pricing.

Workers’ Compensation: Largely stable, with flat to reduced rates in many jurisdictions due to favorable loss experience and strong carrier competition.

Crime & Social Engineering

Social engineering and business email compromise incidents remain widespread. Emerging threats such as deepfake audio and check fraud are gaining traction. While pricing has remained stable, many clients are opting to increase coverage limits and strengthen internal controls and employee training programs.

Fiduciary Liability

Excessive fee claims and wellness program exposures remain key areas of concern for fiduciary liability litigation. While premiums are stable, unfavorable legal outcomes could influence future market conditions. We continue to support clients through benchmarking, policy reviews, and proactive risk management strategies.

Market Outlook

The overall P&C market is stable but remains sensitive to natural catastrophes, social inflation, and geopolitical uncertainty. We recommend building flexibility into insurance budgets and maintaining strong, collaborative relationships with insurers to secure favorable terms and outcomes.

People leaders at professional service firms have been busy in 2025. Economic uncertainty, political changes, military conflict, natural disasters, and the growing influence of AI have deepened the complexity of their roles and of the human capital issues that they manage.

The U.S., UK, and Canada all held significant national elections and had leadership changes in 2024 and 2025. The change in U.S. presidential administration stands out for its impact on the professional services industry. U.S. law firms, for example, are grappling with defending their commitment to inclusion policies amid increased external scrutiny, policy changes, and novel legal maneuvers from the U.S. Government. Further, sudden and substantial changes to trade and immigration policy have created economic and geopolitical uncertainty felt by nearly all professional service firms.

The Los Angeles wildfires and high-profile workplace safety incidents, such as the summer 2025 Park Avenue shooting in New York City, have prompted firm leaders to review and strengthen their disaster response plans to account for new variables, like hybrid and remote work. These events were not only significant threats to the physical safety of colleagues working from home and working in the office, they also challenged the resilience of firm operations and culture. As a result, firms are prioritizing the protection of workers and data, business continuity, and clear communication from leadership during crises.

AI continues to change how professionals deliver services to clients and, increasingly, how business services staff are expected to manage the firm’s operations. People leaders are increasingly being tasked with delivering upskilling and reskilling programs to help build employee trust and confidence in the firm’s AI strategy. There are varying and contradictory theories regarding the impact of AI on early career hiring at professional service firms. However, professional service respondents to Aon’s Global Risk Management Survey 2025 ranked Failure to Attract or Retain Top Talent as their #2 risk, behind Cyber Attack or Data Breach, suggesting that human capital is still crucial to professional services employers. Interestingly, Failure to Attract or Retain Top Talent did not make the top 10 in the GRMS consolidated results.

Continuing a recent trend, in 2025 rising healthcare costs challenged professional service firms and there is only limited relief on the horizon. For some firms, this has led to changes in benefit designs that were once considered unpalatable for a population of knowledge workers, such as strict utilization management for certain prescription drugs and incented use of provider quality comparison tools. The key cost drivers include general inflation, tariffs, provider consolidation, ongoing access to care issues within the UK’s NHS, and promising-but-costly emerging treatments like gene therapies and GLP-1 medications. Healthcare costs will remain a challenge in 2026. Our Actuarial & Analytics colleagues predict costs to rise by 9.8% globally, including a 9.5% increase in the U.S., 8.3% in Canada, and 12% in the UK.

As we enter 2026, we expect firm leaders to continue to align their compensation and benefit programs with the evolving expectations of their workforce and regulatory changes such as, perhaps most prominently, pay transparency laws. We also anticipate continued conversations around the impact of AI, mergers and acquisitions, and geopolitical instability on firm culture.