Is the Market Really Softening for Small Businesses?

• June 30, 2026

By Andy Rose

For the first time in years, property & casualty market commentators have begun using the term “softening” with increasing frequency, raising hopes of much-needed relief for small businesses after a prolonged period of hard conditions.

While some segments are beginning to show signs of rate relief, any broad-market optimism should be treated with caution. Understanding what this means for small businesses requires a closer look at how these trends are playing out in practice.

After several years of rate hikes, the property market is beginning to ease, with pricing now trending toward low- to mid-single-digit increases.

This led to increased competition in the first quarter of 2026, as carriers faced mounting pressure to maintain premium growth in a moderating rate environment. Many insurers sought to defend and grow market share by expanding their underwriting appetite, moderating pricing and, in some cases, loosening terms and conditions. For well-managed property risks, these conditions are translating into meaningful relief.

But there’s an important caveat: This is not a national trend. In catastrophe-exposed regions—including hurricanes in the Southeast; tornadoes, wind and hail in the Midwest; and wildfires in the West—market conditions remain firm and capacity remains tight. Underwriters are highly selective, favoring code-compliant properties, regularly maintained and supported by strong risk mitigation measures. Even with those characteristics, small business insureds in these areas should continue to expect elevated pricing due to ongoing, severe weather-related loss trends.

However, as some parts of the property market start to soften, agent outcomes are increasingly determined by submission quality. Providing complete, up-to-date information—particularly on property condition, upgrades, risk controls and loss history—can materially influence underwriting decisions, especially in the small business segment, where accounts sometimes renew with minimal review.

Although property is showing early signs of relief, liability lines remain notably challenging. Rates continue to rise and capacity remains limited due to increasing claim severity, driven by factors such as social inflation, nuclear jury verdicts and the impact of third-party litigation funding (TPLF).

These pressures are most evident in umbrella liability, where carriers are reducing available limits or withdrawing capacity altogether. This has complicated agents’ efforts to meet contractual requirements, often forcing them to build towers across multiple markets or turn to the excess & surplus market to achieve limits that were more readily available in the past.

TPLF is playing an increasingly influential role, with private equity (PE)-backed firms supporting aggressive legal strategies in plaintiff-friendly jurisdictions. These actors are less focused on the insured’s size than on the availability of insurance limits worth pursuing. As a result, even small businesses with relatively modest umbrella limits of $5 million or $10 million can find themselves exposed to drawn-out litigation and significant verdicts.

For carriers, settling these claims is often more cost-effective than pursuing litigation—an approach that ultimately feeds back into higher premiums and tighter capacity for insureds. As a result, agents should not expect meaningful softening in the liability market this year. Helping small business clients understand why liability remains difficult is now as important as securing coverage itself.

Is the small business market truly softening? As the market moves deeper into 2026, the answer will likely remain both “yes” and “no.” Property rates may continue to ease in certain segments, while liability lines are expected to remain hard. For small businesses insured under a business owners policy (BOP), the net result may be a largely flat outcome for the year.

Andy Rose is vice president of small business insurance at Westfield.