Executive Summary
The third quarter of 2025 marked a period of significant transformation and challenge for the insurance industry. Hurricane Melissa made history as the first Category 5 storm to strike Jamaica, triggering Jamaica's $150 million catastrophe bond. Meanwhile, Wisconsin delivered mixed news: workers' compensation rates dropped for the 10th consecutive year, but ACA marketplace premiums are set to increase dramatically for 2026.
- 185 mph — Hurricane Melissa's sustained winds at Jamaica landfall
- $22 billion — Expected economic losses in Jamaica
- 3.2% — Wisconsin workers' comp rate decrease (10th consecutive year)
- 39-85% — Range of Wisconsin ACA premium increases for 2026
- $16.3 billion — Global cyber insurance market size in 2025
Wisconsin Market Update
10th Straight Year of Workers' Comp Decreases!
Wisconsin companies will pay 3.2% less on average in workers' compensation insurance rates starting October 1, 2025, marking the tenth consecutive year of rate decreases.
Commissioner Nathan Houdek stated: "Employers doing business in Wisconsin can count on the competitive insurance marketplace for affordable, high-quality workers' compensation coverage."
DWD Secretary Amy Pechacek emphasized that this reflects Wisconsin employers' strong attention to workplace safety for the benefit of workers and employers alike.
ACA Premium Crisis Ahead
Governor Tony Evers announced that health care coverage purchased on HealthCare.gov in Wisconsin will rise significantly for 2026, depending on location. The increases are worsened by the expiration of enhanced federal subsidies that have lowered insurance costs since 2021.
Premium increases by county (for a 26-year-old with $48,000 income):
- Waukesha County: 39% increase
- Barron County: 85% increase
Dan Jacobs, owner of Milwaukee restaurant DanDan, expressed concern at a round table with Governor Evers: "About two-thirds of my employees have health insurance through the marketplace, and with the premium increases, we're not going to be able to afford to subsidize them."
Hurricane Melissa: Historic Catastrophe
First Category 5 to Hit Jamaica
Hurricane Melissa made landfall near New Hope, Jamaica at 1 p.m. EDT on Tuesday, October 29, with maximum sustained winds of 185 mph as a Category 5 storm — a record for the Caribbean island nation.
This was the first hurricane to make landfall in Jamaica since Category 3 Hurricane Gilbert in 1988. Economic losses are expected to hit $22 billion, with property damages between $5-10 billion.
Innovative Risk Transfer in Action
Jamaica's $150 million catastrophe bond arranged by the World Bank was triggered by the storm, providing crucial financing for recovery efforts. The bond includes parametric triggers based on storm characteristics such as central pressure and path.
Auto Insurance Market Dynamics
Auto insurance rates continued their upward trajectory in 2025, though the pace shows signs of moderating:
- After a 16.5% average increase in 2024, rates were expected to climb approximately 7.5% in 2025
- The average US driver now pays $2,189 annually — nearly 19% increase over the prior year
- This marks the seventh consecutive year of increases, representing a 78% increase over the past decade
Consumer Response
LexisNexis data shows drivers are shopping around for policies at the highest rate since 2020. Long-tenured customers (10+ years) saw shopping rates rise 35% year-over-year. Since 2021, retention has decreased 5 percentage points to 78%.
Property Insurance: First Rate Decline in 7 Years
According to Marsh's Global Insurance Market Index for Q3 2025, US property insurance rates declined 9% — the first time in almost seven years that rates decreased. This was driven by:
- Insurer competition intensifying as capacity increased
- Improved financial performance
- Lower reinsurance costs
However, homeowners insurance rates continue rising at a pace not seen in more than a decade, with a national average increase of 21% expected.
AI Transformation Accelerates
From Hype to Real-World Impact
A report from Economist Impact found that GenAI is speeding up coding workloads by 30% to 50%, streamlining customer service, and enabling real-time analysis of cyber and climate risks.
Insurance leaders see a major role for agentic AI — autonomous systems capable of performing complex tasks almost independently — suggesting insurance firms of the near future might feature hybrid workforces of human and AI agents.
AI by the Numbers
- 91% of insurance companies will have adopted AI technologies by 2025
- $3.9 billion — Global market for AI in insurance (2025), rising to $6.92 billion by 2028
- 70% reduction in claims processing time from AI-powered automation
- $6.5 billion annual savings from AI claims automation
- 42% of customer service interactions handled by chatbots/virtual assistants
- 28% increase in fraud detection rates from predictive analytics
Cyber Insurance Market Growth
The cyber insurance market continues its strong growth trajectory:
- $16.3 billion — Munich Re's projected global cyber insurance market for 2025
- $23 billion projected by 2026 (S&P Global Ratings), up from $14 billion at year-end 2023
- Organizations with layered cybersecurity controls seeing premium decreases of 20%+
- Some markets now offering $10-15 million limits, up from previous $1-2 million
Key Cyber Threats
- Ransomware: 41% of cyber insurance claims — the #1 reason businesses file
- Phishing: 36% of breaches — second biggest claim type
- Ransomware payouts: $1.1 billion in 2023, double from 2022
M&A Activity Update
Notable Q3 transactions included:
- Arthur J. Gallagher acquired Strategic Services Group (Rochester Hills, MI)
- Lawley merged with ROC Insurance Services (effective September 1)
- World Insurance Associates acquired Green Bay Insurance Center — a Wisconsin agency founded in 1968
- Bold Penguin acquired SquareRisk, an AI-enabled wholesale insurance marketplace
The pace of insurance agency M&A picked up during Q3 2025, though year-to-date activity remained down 7% compared to prior year.
Odd Claims Corner: The iPhone in the Cow
We close this quarter's digest with a peculiar insurance claim that reminds us that truth is often stranger than fiction.
A livestock farmer from Devon, UK topped a specialist mobile insurer's list of weirdest insurance claims. The farmer was using the flashlight feature of his iPhone one dark stormy night to assist his cow during calving when the phone disappeared — he claimed he had lost his phone inside the cow.
The phone was later found (with no mention of exactly where or how), but it was damaged beyond repair.
The claim was successful — the insurer agreed to cover the full cost to replace the farmer's iPhone. This unusual case serves as a reminder that insurance professionals encounter situations that couldn't possibly be predicted, and that sometimes the most unusual claims turn out to be completely legitimate!
Whether it's phones disappearing into livestock, hurricanes triggering catastrophe bonds, or AI transforming underwriting practices, the insurance industry continues to prove its ability to adapt, innovate, and respond to an ever-changing world.
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