The commercial lines insurance industry is undergoing a period of change and uncertainty, shaped by geopolitical turmoil, a shifting market cycle, and the emergence of new risks and underwriting models. Drawing on recent conversations with Executives at carriers and insights from the 12th McKinsey Commercial Lines Roundtable and a survey of leaders from a global group of carriers,[1] we explore these convergent trends and the strategies that insurers are employing to turn challenges into opportunities.
Managing risk amid geopolitical turmoil
For commercial insurers, geopolitical turmoil and economic uncertainty are driving up claims costs and introducing new risks. The unpredictability is almost unprecedented. In September 2025, for example, the US Economic Policy Uncertainty Index reached its highest level since the COVID-19 pandemic.[2] Shifting trade flows and a complex tariff landscape are altering supply chains, requiring carriers to rapidly adapt, particularly in marine and aviation lines. Inflation has created upward pressure on the costs of raw materials, affecting property and motor lines. In short, it is a highly challenging landscape for companies whose business relies on their abilities to gauge and manage risk and to advise clients on risk awareness and mitigation strategies.
Volatility, of course, also presents opportunities, such as increased demand and new risks to cover. And while volatility is likely to continue,[3] our roundtable attendees focused more on the present—the first-order impacts of regulatory shifts (for example, the EU AI Act), tariffs, and capital-flow disruptions—than on scenario planning. This perspective makes a strong case that the most significant differentiator for carriers is agility, or the capacity to react quickly in a rapidly changing environment.
Responding to a shifting market cycle
For most of 2025, we saw rate decreases across most lines in all geographies, and we are now in the midst of a soft market. A notable hypothesis coming out of the roundtable was that technology and data enablement have helped carriers to better manage and anticipate the market cycle. Historically, market softening typically begins with a loosening of policy terms and conditions, followed by adjustments to prices. In this context, limited access to quality forward-looking data has made carriers heavily reliant on qualitative evidence from brokers and reinsurers. Today, however, data APIs and more frequent and near-real-time data feeds improve insurers’ ability to negotiate from an informed perspective. Examples include effective rate changes, which can provide early indications of market softening, and rising quote activity relative to binds, which can signal increasing competition and price pressure.
Despite the advances enabling carriers to anticipate and weather soft markets, roundtable attendees widely agreed that underwriting discipline is still a major factor in the overall success of an insurance carrier in an extremely competitive environment. More than 80 percent of the insurance leaders in our survey cited maintaining underwriting discipline as a top three challenge. To meet this challenge, carriers need to develop their underwriting and distribution teams’ negotiation skills to secure access to high-quality business while achieving sufficient rate adequacy. They also need clear rules and performance management to help underwriters maintain discipline.
Even with improvements in data and technology, a softening market demands action on productivity. More than 90 percent of survey respondents said their companies are aiming for cost reductions exceeding inflation—with approximately 10 percent aiming for cost reductions of more than 20 percent—through AI, automation, and process redesign. AI’s ability to handle large amounts of unstructured data, for example, can reduce insurers’ need for many time-consuming information-gathering and checking processes. Forward-looking carriers will also consider how rapidly maturing agentic AI technology can improve and automate processes.
Using enhanced underwriting models to grow amid uncertainty
Growth remains a top priority for carriers but will not be easily found in a highly competitive market. Tapping into enhanced underwriting methods is one way in which carriers can continue to participate in attractive market segments. These tools can enable insurers to participate in segments where competition using traditional underwriting methods is too expense-heavy or cost-inefficient. Several models of enhanced underwriting—for example, augmented and fully algorithmic—are already being used to place risks faster and more accurately than ever before. (Augmented underwriting refers to models enabled by richer third-party and internal data, shifting the balance from judgment to expertise, while algorithmic underwriting is carried out with little or no human intervention.) These enhanced underwriting models currently account for approximately 8 percent of Lloyd’s generated gross written premium (GWP), and by some estimates, this percentage could reach 70 percent by 2034.[4]
Regardless of the specific degree of change, it is crucial for carriers to establish a stance on enhanced underwriting. The implications will, of course, be different for carriers that seek a lead role and those that choose to follow. But these business models are growing in relevance and rapidly becoming smarter, and they will at some point become standard practice for certain classes.
In a soft market, carriers generally resolve to tighten underwriting and increase efficiency. These are sound aspirations that will continue to deliver benefits. However, forward-looking insurers that leverage existing and emerging technologies—AI in particular—and data sources will be rewarded with even greater advantages. These carriers are likely to be ahead of the curve throughout the market cycle and for years to come.
Antonio Grimaldi is a partner in McKinsey’s London office, where Chien-Teng Chia is an associate partner and Emma Toogood is a consultant. Sylvain Johansson is a senior partner in the Geneva office.
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[1] The roundtable took place in May 2025 with a group of executives from European carriers; the global survey is from the second quarter of 2025 (n = 15).
[2] Economic Policy Uncertainty Index for United States, Federal Reserve Bank of St. Louis.
[3] McKinsey analysis in partnership with Oxford Economics.
[4] The growth of enhanced underwriting in the Lloyd’s market: The new normal?,” Lloyd’s, January 2025.