By Jon Oaks, President of American Advantage Lindow Insurance
As we close out another eventful year, I wanted to take a moment to share an update on the state of the insurance industry and what we’re seeing here in Wisconsin and across the Midwest. While 2025 has brought its fair share of challenges, we’re also beginning to see promising signs of stability and recovery as the market works to balance profitability and protection for policyholders.
Here in the Midwest, convective storm patterns—those that produce heavy wind and hail—have continued to be a leading concern for insurance carriers. These storms are happening more frequently and with greater intensity, resulting in substantial losses across the region. For many carriers, the financial strain comes not only from paying claims directly to policyholders but also from the growing cost of reinsurance, which is the coverage insurers purchase to protect themselves from catastrophic events.
After negative outcomes in both 2023 and 2024, reinsurance rates and retentions have risen sharply. Retentions—what carriers must pay before reinsurance coverage begins—have increased from 1–2% to 3–4%. To put that in perspective, a $3 billion insurance carrier that once had a $30–60 million deductible before reinsurance now faces $90–120 million in exposure per major storm. Each significant weather event can add up quickly, and this has placed lasting pressure on insurers’ financial results.
Another major factor influencing today’s market is social inflation, which is a term used to describe rising claim costs driven by societal, legal, and cultural trends rather than simple economic inflation. This has become especially evident in liability lines such as commercial auto, general liability, and medical malpractice.
Five main forces are driving social inflation:
These developments have resulted in larger claim payouts and prolonged litigation, creating ripple effects across the industry.
Despite these ongoing challenges, there is reason for optimism. Many carriers are beginning to trend toward improved profitability heading into late 2025 and early 2026. This progress largely stems from changes made over the past few years to manage wind and hail exposure within property policies.
Carriers have adapted by modifying coverage terms, adjusting deductibles, and recalibrating policy structures to more accurately reflect today’s storm-related risks. These changes, while sometimes difficult for policyholders, are helping stabilize the market and ensure long-term sustainability for insurers and clients alike.
Over the past two to three years, nearly all carriers have made adjustments to homeowners’ and property insurance policies, especially around roof coverage. These updates are designed to control claim costs, but they also make it more important than ever to review and understand your coverage.
Here are a few of the most common changes we’re seeing:
While these adjustments can lead to higher out-of-pocket costs for homeowners, they also allow insurers to continue offering coverage in regions heavily affected by storms. It’s part of a necessary balancing act between affordability and sustainability.
Looking Ahead
Even with these pressures—rising reinsurance costs, social inflation, and evolving policy terms—the insurance industry is slowly turning a corner. Many carriers anticipate that profitability will continue to improve throughout 2026 as recent adjustments take full effect.
It’s a crucial time for both individuals and businesses to review their insurance policies, understand how these industry changes affect their coverage, and ensure they’re adequately protected. Our team at American Advantage Lindow Insurance is always here to help answer your questions, explain your options, and make sure you’re getting the right coverage for your needs.
Here’s to a quieter 2026 and a more stable insurance landscape ahead.
.png)
