Executive Summary
The final quarter of 2025 and opening weeks of 2026 delivered one of the most eventful periods in recent insurance history. The January 2025 Los Angeles wildfires—specifically the Palisades and Eaton fires—emerged as the most expensive wildfire catastrophe ever recorded globally, with insured losses estimated between $30 billion and $45 billion. Meanwhile, the expiration of enhanced ACA subsidies created a healthcare coverage crisis, with Wisconsin marketplace premiums increasing anywhere from 45% to over 800%.
- $30-45 billion — LA wildfire insured losses (costliest wildfire ever)
- 45%-800% — Range of Wisconsin ACA premium increases
- 91% — Insurance companies adopting AI by 2026
- $16.3 billion — Global cyber insurance market (doubling by 2030)
- $1.50 — New WI CE fee per credit (up from $1.00, effective Feb 1)
- $1 trillion+ — Industry surplus (reinsurance capital exceeds $725B)
Los Angeles Wildfires: One Year Later
Most Expensive Wildfire Catastrophe in History
The January 2025 Los Angeles wildfires—the Palisades and Eaton fires—remain the defining catastrophe of the insurance industry's recent history. One year later, the fires rank as the most expensive wildfire event globally, with total insured losses estimated between $30 billion and $45 billion.
Swiss Re Institute estimates $40 billion in insured losses, while UCLA projections suggest total losses could reach $75 billion when all claims are finalized. The fires destroyed more than 16,000 structures across Los Angeles County.
Survivors Still Struggling
Seven in ten fire survivors have yet to return home, according to a survey by Department of Angels, a nonprofit formed after the fires. The survey found that 4 in 10 insurance policyholders experienced insurability issues, including huge premium increases and dropped coverage.
State Farm, California's largest home insurer, faced particular scrutiny after Los Angeles County announced an investigation into complaints about delayed, underpaid, and denied claims. The California Department of Insurance has taken legal action against the FAIR Plan over its response, particularly regarding smoke-damage claims.
- Double penalties for insurer misconduct
- Require upfront payments for ACV and structure replacement costs after total loss
- Expand Additional Living Expenses policy limits by 100% in declared disasters
- Require mandatory offers of extended and guaranteed replacement cost coverage
The California DOI reported that $22.4 billion in claims payments have been distributed since January 2025—the fastest pace of payments on record for California disasters.
Wisconsin Market Update
ACA Premium Crisis Hits Hard
The most significant Wisconsin insurance story of the quarter was the dramatic increase in ACA marketplace premiums for 2026. With enhanced federal subsidies expiring at the end of December 2025, many Wisconsinites faced premium increases ranging from 45% to over 800%, depending on location, age, and income.
Governor Evers and Senator Tammy Baldwin highlighted specific examples: a 60-year-old couple in Barron County with an income of $85,658 would see their premium increase by 812%, while a 26-year-old in Waukesha County with a $48,000 income would see a 39% increase.
More than 310,000 Wisconsinites purchased health insurance through HealthCare.gov for 2025, with 88% qualifying for tax credits that saved an average of $664 per month. The elimination of enhanced subsidies created particularly acute problems for small business owners who relied on the marketplace for employee coverage.
The impact on the self-employed, gig workers, and early retirees has been especially severe, with many choosing to go uninsured rather than pay dramatically higher premiums.
Workers' Comp: 10th Consecutive Decrease
Wisconsin's workers' compensation market continues to demonstrate the state's strong workplace safety record. Following the 3.2% rate decrease effective October 1, 2025—the tenth consecutive year of decreases—employers continue to benefit from a favorable rate environment.
The Wisconsin auto insurance market also compares favorably to national averages. While the national average auto insurance rate sits at approximately $2,435, Wisconsin drivers pay an average of about $1,730—a reflection of the state's lower claim frequency and more moderate legal environment.
State Employee Insurance Changes
The Group Insurance Board approved several medical benefit changes effective January 1, 2026:
- Coverage for Continuous Glucose Monitors (CGMs) moved under the pharmacy benefit
- Medicare Advantage subscribers and spouses can now earn the $150 Well Wisconsin incentive
- Common Ground Healthcare Cooperative became CareSource (offered in partnership with GHC of Eau Claire)
- Average non-Medicare premium increase: 8% for 2026
- FSA carryover limit increased to $660 (up $20 from 2025)
Wisconsin's continuing education credit submission fee increases from $1.00 to $1.50 per credit hour effective February 1, 2026—a 50% increase. Agents completing their 24 required CE credits will see total state submission fees increase from $24 to $36.
AI Transformation Accelerates
AI Becomes the Industry's Operating System
Artificial intelligence evolved from a topic of discussion to an operational reality for the insurance industry during this period. SAS industry experts foresee 2026 as a breakthrough year in which AI will become central to how insurers operate—no longer as an accessory, but as something like the business's operating system.
By 2026, approximately 91% of insurance companies are expected to have adopted AI technologies in some form, with the AI-in-insurance market projected to grow from $7.7 billion in 2024 to $35.8 billion by 2029.
AI by the Numbers
- 12.4 minutes — Average underwriting decision time (down from 3-5 days)
- 99.3% — Accuracy rate in AI risk assessment
- 42% — Customer service interactions handled by AI chatbots
- 36% — Total AI value captured in underwriting alone (BCG estimate)
- 70% — Potential processing time reduction from agentic AI
- 23 states + D.C. — Jurisdictions adopting NAIC's AI Model Bulletin
The Rise of Agentic AI
The rise of "agentic AI"—autonomous systems capable of performing insurance tasks without human input—represented a major development in 2025. These AI agents can perform tasks end-to-end, including submissions, claims, policy system updates, and communications. Analysts project that by late 2026, more than 35% of insurers will deploy AI agents across at least three core functions.
Cyber Insurance Market Dynamics
Market Set to Double by 2030
Munich Re estimates the global cyber insurance market totaled $16.3 billion in 2025. The market is expected to more than double by 2030, growing at an average annual growth rate of more than 10%.
North America remains the largest market, accounting for 69% of global premiums ($10.6 billion in 2024). Cyber has been ranked as the most significant global risk for business for the fifth consecutive year in the Allianz Risk Barometer.
Key Cyber Statistics
- Ransomware: 41% of claims filed
- Remote access: Behind 80% of ransomware attacks
- Financial services breaches: 2.3 average per organization, $3.9M average cost
- Rate trends: 6% lower in 2025 than prior year, 22% down from 2022 peak
- 2026 forecast: S&P predicts 15-20% premium increase
- Coverage gap: 60-70% of large corps have coverage vs. only 10-20% of SMEs
Reinsurance & Market Conditions
The January 1, 2026 reinsurance renewals reflected abundant capacity that accelerated market softening. Key indicators:
- Industry surplus: Surpassed $1 trillion
- Reinsurance capital: Exceeds $725 billion (up 9% in 2025)
- Cat bonds: All-time high of more than $58 billion (15 first-time sponsors in 2025)
- Reinsurer returns: Expected to exceed cost of equity by 8.6 percentage points
WTW's Insurance Marketplace Realities report describes late 2025 as a "unique and promising inflection point" where years of volatility are giving way to a "clear and stable horizon."
Life Insurance Growth Continues
The life insurance market demonstrated strong performance through the period:
- IUL new premium: Record $2.1 billion year-to-date (21% growth)
- VUL new premium: $1.2 billion (27% growth)
- Total new annualized premium: $8.4 billion (up 11% over prior year)
- Accelerated underwriting: Face amounts up to $5 million now approved without medical exams
M&A Activity Update
The insurance M&A market demonstrated continued robust activity. The sector reported $31.8 billion in announced deals from 207 transactions for the six-month period from June 1, 2025, to November 30, 2025.
Notable transactions included:
- Brown & Brown acquired Accession Risk Management Group for $9.8 billion (June 2025)
- Sompo Holdings acquired Aspen Insurance Holdings for $3.5 billion (August)
- Acquarian acquired Brighthouse Financial for $4.1 billion (November)
- AIG and Onex jointly acquired Convex Group Limited for $7 billion (October)
- Arthur J. Gallagher acquired AssuredPartners and Woodruff Sawyer ($1.2B)
- Baldwin Group and CAC Group announced merger (December)
Insurance agency M&A totaled 695 transactions in 2025, down 12% from 2024. PwC predicts M&A activity in 2026 will be on par with 2025.
Regulatory Updates
The NAIC Fall 2025 National Meeting featured significant developments:
- AG 55 reports: Companies must submit first reports on offshore life reinsurance transactions by April 1, 2026
- Actuarial Guideline XLIX-A: Revisions apply to policies sold on or after April 1, 2026
- RBC principles: 11 high-level risk-based capital principles adopted
- PBM Guidelines: Pharmacy Benefit Management Licensure and Regulation Guidelines adopted
- NFIP: Reauthorized until end of January 2026
- Flood Insurance Blueprint: NAIC plans development in 2026
Odd Claims Corner: The Paint-Licking Ponies
Each quarter we feature unusual insurance claims to remind ourselves that in this industry, truth is often stranger than fiction.
This quarter's winner comes from Dartmoor National Park, where twelve wild ponies caused £1,200 worth of damage by licking the paint off a parked car. The ponies apparently developed a taste for the car's finish, leaving the vehicle covered in tongue marks and stripped of paint.
The bemused owner successfully filed an insurance claim for the unusual livestock damage. The lesson? In rural England, it's not just deer that pose a risk to your vehicle—watch out for equine gourmands as well.
Also notable: a British holidaymaker in Athens successfully claimed for a broken nose after walking into a bus shelter. His explanation? The unexpected appearance of a group of bikini-clad women had distracted him. His insurers apparently agreed this was sufficiently distracting and paid out in full.
Insurance professionals should remember: it's not the stranger-than-fiction nature of the claim that matters—it's whether the loss falls within the policy terms.
Key Dates for Wisconsin Professionals
- February 1, 2026: CE submission fee increases to $1.50/credit
- March 22-25, 2026: NAIC Spring National Meeting (San Diego)
- April 1, 2026: AG 55 reports due; AG XLIX-A revisions effective
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