The public entity insurance market remains largely favorable for buyers, with competitive property pricing, growing capacity and new carrier entrants creating opportunities for improved coverage terms, according to a new state of the market report from Amwins.

However, the segment faces mounting challenges on the casualty side, where nuclear verdicts, reviver statutes and litigation funding are driving up loss costs. Proposed changes to FEMA’s Public Assistance program could compound those pressures — the Urban Institute estimates that more than 70% of past major disasters would have been denied under the proposed framework, potentially shifting roughly $15 billion in aid to state and local budgets, the report said.

Property Market Favors Buyers — for Now

Competition among carriers is strong and capacity is readily available across most property segments, according to Amwins. Healthy combined ratios, carrier growth goals and new market entrants suggest the current softening trend is unlikely to reverse in the near term, though a significant catastrophe loss — particularly in high-exposure areas such as California — could shift conditions quickly, the report said.

The rate environment has enabled many public entities to purchase additional limits or lower deductibles after being forced to reduce coverage during the recent hard market cycle, according to Amwins. Buyers are also increasingly securing higher terrorism limits and active assailant coverage, and exploring alternative solutions such as deductible buybacks and parametric products.

Larger shared and layered programs are often becoming oversubscribed, the report noted, prompting restructuring to achieve the most effective combination of coverage and cost. At the same time, more carriers are targeting middle-market opportunities, offering products designed for smaller entities such as regional school districts and municipalities. Technology and artificial intelligence tools are enabling carriers to process higher submission volumes efficiently, resulting in more aggressive pricing and broader terms in that segment.

Despite the favorable conditions, underwriting scrutiny remains tight for accounts with significant catastrophe exposure or adverse loss histories, Amwins said. Carriers are pushing for more accurate property valuations and paying closer attention to roof age, construction type and loss control efforts, the report said.

Casualty Pressures Mount From Litigation and Legislative Shifts

The casualty market presents a more challenging picture for public entities. Fewer carriers are willing to participate in lead layers, line sizes are shrinking and excess participants are increasingly selective, according to Amwins.

Nuclear verdicts remain a significant cost driver, particularly in law enforcement and transportation claims. Third-party litigation funding has intensified settlement pressure and made claims resolution more costly and unpredictable, the report said.

Among the most consequential developments are reviver statutes, which have exposed K-12 schools, municipalities and counties to a wave of historical claims. Los Angeles County faced thousands of claims tied to foster care, juvenile detention facilities and educational institutions, resulting in a $4 billion settlement, the report noted. Additionally, plaintiffs are increasingly migrating claims into federal courts by alleging civil or constitutional rights violations, effectively bypassing state tort caps.

Underwriting in the casualty space remains highly dependent on jurisdiction, with carriers focusing primarily on the most recent three to five years of loss experience rather than the traditional 10-year window, according to Amwins. That shift has amplified liability rate increases for accounts with emerging or deteriorating loss trends.

Parametric and Professional Lines Draw Increased Attention

Proposed FEMA reforms that would raise the per-capita damage threshold for Public Assistance eligibility from $1.89 to more than $7 — and fix the federal cost share at 75% — are prompting greater interest in parametric insurance, the report said. Parametric solutions offer public entities faster payouts and more flexible funding, and the market could grow to $34.4 billion by 2033, according to Allied Market Research.

On the professional lines side, cyber liability coverage remains a priority as claims activity continues, though rate increases have not yet materialized broadly. Underwriting requirements are consistent across carriers, and appetite remains stable, according to Amwins. However, the market is tightening for larger risks such as pools and joint purchase agreements.

Package carriers offering blended professional and general liability coverage are reducing limits and in some cases eliminating certain coverages, particularly for public official and employment practices liability. That trend is driving increased interest in standalone policies, which offer competitive coverage where available with sustainable pricing and reasonable retentions, the report said.

Obtain the full report here. &