2025 insurance industry outlook: Key trends and strategic insights for insurers

Corporate Transparency Act update: 

As of early January 2025, the Corporate Transparency Act (CTA) is currently on hold due to a nationwide injunction, meaning businesses are not required to file beneficial ownership information reports as the law is temporarily not enforceable; this injunction is currently under review by the Fifth Circuit Court of Appeals, with the federal government petitioning the Supreme Court to lift the injunction.

New AML program requirements announced in Aug. for Registered Investment Advisors (RIAs)/Exempt Reporting Advisor (ERAs): 

A new regulation was passed in Aug.2024 expanding the definition of financial institutions to include registered investment advisors and exempt reporting advisors. Starting Jan. 1, 2026, these entities must comply with the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations, including transaction monitoring, customer due diligence, ongoing training and independent testing. 

Next steps:    

• Covered investment advisors should first perform a gap assessment to determine what regulatory requirements they currently have covered and where they need to focus additional efforts. Many investment advisors are choosing to outsource AML compliance much like other back-office functions, such as fund admin and compliance activities. In this case, you should partner with a firm that can stand up a fully compliant program with subject matter experts that understand your industry as well as AML.    
• If you choose to build an in-house function, start with doing an AML risk assessment to determine what areas of risk you have with regards to customers, products/services and geographic footprint. From there, build a risk-based program and determine where you need to make investment in technology and human resources to execute compliance activities day to day. Make sure you take a technology-led approach to minimize risk and streamline processes, along with dedicated personnel with experience in AML. 

Explore this topic further by reading our article, Life insurers be on guard: How money laundering is impacting the insurance industry and tips to mitigate the threat on your organization. 

In the on-demand webinar recording below, the section on financial crimes solutions, hosted by Ashley Farrell, starts at 02:55. 

In 2025, insurers should have global risks on their minds for strategic foresight while also looking inside their own house for emerging risks. Several of the key risks to watch out for include: 

• Data governance: Data governance is a critical risk for insurers in 2025 due to the increasing volume and complexity of data they manage. Effective data governance ensures that data is accurate, consistent and secure, which is essential to make informed decisions, comply with regulations and maintain customer trust. Poor data governance can lead to data breaches, legal penalties, and reputational damage, making it a top priority for insurers. 
• Artificial intelligence (AI): Artificial intelligence (AI) presents both opportunities and risks for insurers. While AI can enhance underwriting, claims processing and customer service, it also introduces challenges related to transparency, bias and accountability. Insurers must ensure that their AI systems are reliable, ethical and compliant with regulations. Failure to manage AI risks can result in inaccurate risk assessments, unfair treatment of customers and legal liabilities. 
• Third-party risk management (TPRM): Third-party risk management is increasingly important as insurers rely on external vendors for various services, including IT support, data processing and customer service. These third parties can introduce risks related to data security, operational disruptions and compliance. Insurers must implement robust third-party risk management frameworks to assess, monitor and mitigate these risks, ensuring that their partners uphold the same standards of quality and security. 
• Cybersecurity: Cybersecurity remains a paramount concern for insurers in 2025 due to the growing sophistication of cyber threats. Insurers hold sensitive personal and financial data, making them prime targets for cyberattacks. A successful breach can result in significant financial losses, regulatory scrutiny and loss of customer trust. Insurers must invest in advanced cybersecurity measures, regular risk assessments and employee training to protect against these evolving threats. 
• Core property and casualty: The property and casualty (P&C) insurance sector faces various risks, including natural disasters, climate change and economic volatility. Insurers must accurately assess and price these risks to remain solvent and competitive. Failure to do so can lead to inadequate reserves, increased claims payouts and financial instability. Keeping abreast of environmental and market trends is essential for effective risk management in the P&C sector. 
• Core life and health: The life and health insurance sectors also face significant risks, including changing demographics, medical advancements and regulatory changes. Insurers must navigate these challenges to provide sustainable products and services. Mismanagement of these risks can result in higher claims costs, product obsolescence and regulatory penalties. Continuous monitoring and adaptation to industry developments are crucial for resilience and profitability in the life and health insurance sector. 

For a further breakdown of each of the key trends and considerations that insurers should keep in mind as they take on 2025 and beyond, refer to our article, Navigating an uncertain future: Key trends for internal audit leaders in the insurance industry.  

In the on-demand webinar recording below, the risk advisory section with John Romano starts at 11:42.  

The insurance industry continues to face challenges like inflation, rising claim costs and natural disasters which are increasing premiums. Customer loyalty is declining as consumers seek lower rates, and there is a talent shortage on top of this. Insurers need to balance strategic pricing, innovation and efficiency to overcome these issues in 2025 and beyond, and using artificial intelligence (AI) can help streamline operations and improve customer experience.  

• The insurance industry faces challenges with poor data quality and inconsistency, stemming from unstructured data, siloed systems and data complexity across different business lines. Legacy systems and manual workarounds further hinder operations. To fully leverage their data, insurers need to modernize systems, eliminate silos and improve data management. 
• Key obstacles for insurers include inconsistent data in underwriting, slow claims processing due to manual decision-making and outdated systems, reliance on legacy platforms in policy and claims administration, limited real-time financial insights from manual reporting processes, difficulty extracting insights from unstructured legal and compliance documents, and manual actuarial work in Excel slowing decision-making. A unified approach to modernization, automation and data management is needed to overcome these challenges and fully leverage data in the insurance industry. 

For a deeper dive into the world of digital transformation in the insurance industry, check out our article and watch the recording from our recent webinar on the subject. 

In the on-demand webinar recording below, the digital section with Phil Schmoyer starts at 34:39. 

Many forces are in play and impacting the insurance landscape. The January 2025 Los Angeles fires have caused significant personal property and homeowner damage and insurance concerns as we present this year’s update. Commercial business in the affected area appears at this stage to be mainly small businesses, given it's a largely residential area impacted by the fires.  

On a commercial insurance level, there are a couple of issues to watch for in 2025:  

• Cybersecurity remains high on the radar of things business owners and risk management are concerned about. Ransomware payments continue to grow in magnitude for both small and medium-sized enterprises (SMEs) and large companies.  
• Business interruption resulting from cyber issues continues to cause significant financial loss. Recovery periods and restoration time frames continue to be longer than anticipated leading to a slower than expected return to normal operations. Policy enhancements will be discussed in 2025, which may include a broader introduction of parametric elements to cyber policies.  Understanding the scale and scope of any data exfiltrated in a cyber breach is proving to be significantly more costly and complicated than expected, with organizations struggling to get a handle on what data is held, what has been breached and who they must communicate with. 
• Since the market is set to increase from around $15B now to $50B by 2030, 2025 could be the year to start looking at the recourse needed to support such growth – claims experience, expertise and technology will play a part in ensuring that market growth can be supported – as the market grows, claims will increase in volume. 
• Complex liability and class action issues will continue to develop in 2025. The number of class actions is expected to continue to grow and the settlement of funds established has to be managed. The insurance industry will be expected to contribute to settlement programs. Obligations around contributions and coverage will be litigated in 2025. Labor and employment class actions are expected to be the largest part of the class actions space. There is also an expectation that the trends around food and consumer products class actions will continue.  

Both of these issues – cybersecurity risk and class actions – will lead to an increased need to rely on technology upgrades and tools to assist in the management of such claims landscapes. As markets expand (cyber), claims grow (cyber and class actions), and the data being exchanged to measure damages is growing as well. Meanwhile, the expectations around data processing claims responsiveness and cost effectiveness is a pressure point for the industry. Additionally, the claims industry and claims professional network is more widespread than ever with many organization’s teams spread across the nation.  

In the on-demand webinar recording below, Simon Oddy’s section focusing on insurance claims updates and mega verdicts starts at 52:25. 

While 2024 was a relatively quiet year in terms of accounting changes impacting the insurance industry, consider it the calm before the storm as 2025 proves to be a transformative year with both the principles-based bond project and long-duration targeted improvements taking effect for insurers this year. 

The NAIC’s bond project will impact nearly all insurers, if not from an accounting lens, certainly from a reporting perspective. If they haven’t already, insurers should begin working with investment advisors and auditors to evaluate their investment portfolio and identify securities that will require new accounting and/or reporting within Schedule D. 

Additionally, you can find our article on updates from the National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles (E) Working Group’s (SAPWG) latest meeting. 

On the GAAP side, long-awaited targeted improvements to the accounting for long-duration contracts will take effect for many insurers this year. While SEC filers have been subject to the new standard for a couple of years, 2025 marks the first year for non-public companies to adhere to the new standards. Insurers will want to coordinate their finance and actuarial resources to respond to new ways of accounting for and disclosure of liabilities, market risk benefits and deferred acquisition costs. 

In the on-demand webinar recording below, Dan Buttke’s section on new accounting guidance and updates starts at 1:21:50. 

Staying informed about tax updates is vital for insurers to navigate the complex and dynamic fiscal environment effectively. Several important updates to stay on top of in 2025 include: 

• Corporate Alternative Minimum Tax (CAMT): The CAMT aims to ensure that large corporations pay a minimum level of tax, regardless of deductions and credits. Effective from Jan. 1, 2023, the CAMT mandates that corporations with adjusted financial statement income exceeding $1B will be subject to a minimum tax rate of 15%. This measure prevents tax avoidance strategies that have previously allowed some corporations to minimize their tax liabilities significantly. Insurers should review their financial statements and tax strategies to assess the potential impact of CAMT on their taxable income. 
• Tax Cuts and Jobs Act (TCJA) adjustments: The TCJA, introduced in 2017, brought sweeping changes to the U.S. tax code. In 2025, several provisions of the TCJA will undergo adjustments. One notable change is that bonus depreciation on capital investments continues its phase out, with only 40% eligible for bonus depreciation in 2025. Insurers should re-evaluate their capital investment plans and tax strategies to optimize benefits from these changes. There are other notable changes relating to international provisions related to the base erosion and anti-abuse tax (BEAT), global intangible low-taxed income (GILTI), and foreign-derived intangible income (FDII). Effective for periods beginning after 12/31/2025, the BEAT rate is set to increase and the GILTI and FDII deductions are set to decrease. 
• Bermuda corporate income tax: The Bermuda Corporate Income Tax Act of 2023 imposes a 15% income tax and is applicable to Bermuda businesses that are part of multinational enterprise groups with annual revenue of EUR 750 million or more. The tax will be effective beginning in 2025. This development is particularly relevant for insurers with subsidiaries or operations in Bermuda, as it could affect the overall tax burden and require adjustments in financial reporting and tax planning. Compliance with the new tax regulations will be crucial to avoid penalties and ensure smooth operations. 
• U.S. tax policy updates: The United States continues to refine its tax policy to foster economic growth and address fiscal challenges. In 2025, several key updates include the introduction of a new tax credit for renewable energy investments, increased funding for the IRS to enhance enforcement and compliance, and measures to close loopholes in the international tax system.  In addition, Republicans, who now control both chambers of Congress and the White House, will attempt to pass a tax reform bill extending many of the expiring TCJA provisions. Insurers should stay abreast of these developments and adjust their tax strategies accordingly to capitalize on available tax credits and ensure compliance with enhanced regulations.   

To stay on top of all of the latest tax updates impacting the insurance industry, keep an eye on our webpage. 

In the on-demand webinar recording below, the section featuring important tax updates, hosted by Tim Kramer, Wes Young and Dave Gibson, starts at 1:37:05.