With courtroom verdicts climbing and underwriting standards evolving, here are six key insights independent agents and brokers should know about today’s umbrella insurance market.
What Is an Umbrella Policy?
An umbrella liability policy provides additional protection that kicks in once the limits of underlying liability policies are exhausted.
This means that once the underlying policy limits are exhausted after a claim payment, the umbrella policy can step in to cover the remaining amount owed to the claimant. Additionally, if a loss is excluded under the underlying liability policy but not excluded under the umbrella policy, the umbrella coverage may apply even though the primary policy does not respond.
Patrick Wraight, director of education at Insurance Journal’s Academy of Insurance, explained that an umbrella policy — particularly one issued by a different insurer than the underlying policies — may contain different coverage terms, conditions, and exclusions compared to the underlying liability policies.
In comparison, an excess liability policy, like an umbrella policy, provides coverage once the underlying policies have reached their limits. However, it is structured to follow the same terms, conditions, and claim-handling procedures as the underlying policies.
Pressure on Umbrella Pricing Remains
While capacity may be expanding across the broader commercial insurance market, pricing pressures continue to affect the umbrella segment. In some instances, carriers are offering $2 million or $3 million limits in place of the traditional $5 million lead umbrella layer.
In analyzing this trend, Society Insurance — a Wisconsin-based mutual insurer — identified third-party litigation funding and social inflation as key factors driving the growing severity of claims.
Data from Marathon Strategies reveals that jury awards surpassing $10 million — and even $100 million — are increasingly frequent, with nuclear verdicts rising 27% from 2022 to 2023. At the same time, insurers are managing capacity more cautiously, often lowering the coverage limits they’re willing to provide.
How Underwriting Has Changed
Society Insurance reports that umbrella policy underwriting has grown increasingly selective and data-driven. Carriers are applying heightened scrutiny to loss history, safety protocols, and risk management practices, while adopting smaller, more targeted layers shared among multiple insurers instead of large, single-layer limits.
Insurers are increasingly requiring higher underlying policy limits before umbrella coverage applies. Society advises agents to be ready to educate clients about these changes and assist them in showcasing their risk profile effectively. This involves highlighting proactive safety initiatives, employee training, and transparent claims history.
Why Carrier Financial Strength Matters
Focusing exclusively on the contractual language of a commercial umbrella policy is a mistake, warns Chris Longo, CEO and managing director of McGowan Excess & Casualty. During an Academy of Insurance webinar, Longo highlighted a timeless principle: the critical importance of assessing a carrier’s financial stability and claims-handling expertise.
“So, the financial strength of the carrier, you want them to be around for many years so that they can pay umbrella claims,” Longo said. “You want to make sure that they have the ability to pay as well as handle umbrella claims,” he said, adding that their experience in the umbrella marketplace is important, too.
Obtaining an umbrella policy from a carrier lacking experience in managing large, complex claims can lead to challenges. Longo emphasized that insurers must be equipped to handle such claims with expertise and confidence.
He identified AM Best ratings as the industry’s primary benchmark for assessing financial strength.
Reshaping How Personal Lines Clients Think About Liability
The reality is straightforward: Many personal lines clients with modest assets often do not perceive umbrella insurance as necessary.
Marjorie Segale, president and founder of Segale Consulting Services and vice president of education and founder of the Insurance Community Center, witnessed this firsthand as an agent. During an Academy of Insurance webinar, she emphasized the importance of helping clients realize that umbrella insurance isn’t about their personal net worth.
“It’s the amount of damages that another party can claim against your client that gives rise to the need for this policy,” she said. “It is critical.”
Many umbrella policies are specifically designed to align closely with the coverage provided by a client’s homeowners or auto policy, with forms that can differ significantly, Segale explained. Since client exposures influence available coverage options, agents and brokers must thoroughly understand these risks to recommend the appropriate product and choose the right carrier.
Commercial Umbrella Outlook
According to USI Insurance Services’ 2025 Commercial Property & Casualty Mid-Year Addendum, umbrella and excess insurance rates for middle-market buyers are projected to remain flat or rise up to 10% over the next six months. Meanwhile, risk management buyers may face increases of up to 20%, depending on their prior loss history and business classification.
The insurance brokerage and consulting firm reported that capacity in umbrella and excess liability lines remains sufficient, with rate increases generally stabilizing for most insureds. USI’s addendum noted that social inflation continues to pose an ongoing challenge for liability lines amid evolving social dynamics.
