2025 loss picks confirm cracks in commercial lines reserving

Research

This research piece shows how we dissect pressure points emerging across the core commercial lines. We highlight how muted 2025 loss pick shifts sit at odds with worsening other liability development, why workers’ comp reserve releases are losing momentum as years of soft pricing catch up, and how commercial auto optimism is running ahead of underlying trends. It illustrates how we translate technical reserving signals into clear insight on capital strain, risk selection and the durability of carriers’ pricing power heading into 2026.

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The industry may be overly optimistic on casualty loss trends as workers’ comp is stretched thin.

In our initial analysis of 2025 statutory data published last Monday, we noticed cracks apparent in industry loss ratios despite the year’s strong results as a whole. Weakness in other liability continued while workers’ compensation loss ratios ticked up, though the industry benefitted from strong personal lines results and the absence of major catastrophe losses.

This view was supported later in the week by our note on Schedule P reserving data, which showed rising adverse development in other liability and commercial auto from recent “hard market” accident years and falling reserve releases from workers’ comp.

With all of this in mind, we have built on these prior analyses by examining the loss picks and prior period development by lead insurers in three key commercial lines of business in 2025: other liability, workers’ comp, and commercial auto liability.

Note that the analysis looks at individual companies, as reliable data at the group level is currently unavailable for 2025. This makes for a good industry proxy but is not a total substitute for a complete group-level analysis.

The chart below aggregates loss picks from the top 10 companies in each line of business over the past decade. Loss picks were largely unchanged for all three lines between 2024 and 2025, though commercial auto remains substantially down from 2023.

Commercial auto has historically had higher loss picks than the other two lines, given its shorter tail and the struggles that the industry has had in the past with getting ahead of its loss trends. Other liability and workers’ comp trail behind.

Delving deeper into other liability by company, we found that most companies’ loss picks moved up only slightly in 2025 compared to 2024. This is somewhat disconcerting, given that recent AY reserve buckets for the line were found to have already been developing adversely in our recent Schedule P analysis.

For workers’ comp, we found that loss picks moved up slightly and prior period development declined year-over-year. This is also in line with our Schedule P findings and indicates that the well is starting to run dry on reserves from the line as years of substantial releases and softening rates have taken their toll.

Commercial auto loss picks remained generally stable, with minimal prior period development. Industry loss ratios fell for the line in 2025, as we noted in our initial stat data review last week, but we maintain our belief that the industry is getting ahead of itself due to recent rate increases.

As such, we would not be surprised to see results turn again in the near future.

We discuss these points in greater detail below.

Other liability

Most of the top carriers moved their loss picks up only modestly between 2024 and 2025, with the aggregate ticking up just 0.6pts. Arch Insurance’s loss picks fell substantially, but removing them from this analysis does not materially change the aggregate due to the size of its book relative to the other companies listed.

Other liability has been a troubled line for the industry over the past few years, so we are surprised to not see more conservative loss picks by top carriers as the industry still seems to be struggling to get ahead of loss trends for the line.

Prior period development increased year-over-year, driven primarily by CNA’s Continental Casualty and Zurich American.

Adverse development for other liability has continued, concentrated primarily from AYs 2022 through 2024. This is particularly concerning given that these are ostensibly “hard market” AYs, and indicates that we are not yet out of the woods on the industry’s struggles with this line.

Given the lack of substantial loss pick increases in 2025, we would not be surprised to see adverse development trends continue in 2026.

Workers’ compensation

Coincidentally, aggregate workers’ comp loss picks also increased by 0.6pts between 2024 and 2025.

Industry loss ratios for the line increased by 3.1pts in 2025 according to our initial stat data analysis, with major industry players such as Zurich and Berkshire Hathaway seeing double digit increases to their loss ratios.

We have often remarked that the industry’s repeated squeeze of workers’ comp for reserves to offset adverse development in other lines of business has been an unsustainable practice, particularly as strong results for the line have led to years of softening rates.

Dovetailing with that is the data below on prior period development, which decreased by 3.1pts year-over-year.

While the industry still released more than $5.5bn of workers’ comp reserves in 2025, more than $2.4bn of those releases came from AYs before 2016. Releases from more recent accident years were relatively minimal and possibly indicate that results from those years are not sufficiently strong to enable the sort of reserve releases that the industry has been able to rely upon in the past.

Commercial auto liability

The industry has struggled with commercial auto over the past few years, as the industry has been unable to get ahead of rising liability loss costs driven by social inflation.

However, aggregate loss picks remained almost constant for the line in 2025. This follows a substantial decline in aggregate loss picks from 2023 and 2024.

At the same time, the overall industry loss ratio for the line also fell in 2025. Top players in the line seem to believe that they are finally getting a handle on this troubled line, even as rate increases have started to decelerate, according to Q4 CIAB pricing data.

Overall, we are skeptical that the industry is truly past its troubles with commercial auto. Recent developments from Selective, as well as adverse development from recent accident years, indicate that troubles are likely to persist.

Prior period development for top companies turned from favorable to adverse in 2025, though the top two companies both improved their prior period development from 2024. 

 In summary, we believe that loss picks in key commercial lines show that the industry could face trouble in 2026 due to continued other liability issues, declining workers’ comp releases, and undue optimism in commercial auto. 

By Henry Meiners, Noah Marchese, Amit Kumar
March 20, 2026

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