Arch leans into US casualty as outlier in softening rate cycle

Bermuda-based Arch Capital is doubling down on US casualty, even as softening persists across other lines.

US casualty insurance is experiencing a significant increase, compared with the general trend of falling rates in other commercial lines.

In the second quarter of 2025, US casualty insurance rates surged by approximately 9% on top of an 8% increase in Q1. Excluding workers’ compensation, the rate increase is even higher, at around 12%. 

“As we look to the future, I think I don’t have a crystal ball, but, you know, we think the wind behind casualty should support additional goals,” Arch CEO Nicolas Papadopoulo (pictured) told analysts during a Q2 earnings call. “We’ve seen rates exceeding trends.”

Narrowing the focus even further, Papadopoulo said that the excess liability and surplus segments of US casualty were especially attractive to Arch. 

These segments have seen particularly pronounced rate increases, with risk-adjusted rates rising by as much as 18%. Programmes with a history of adverse loss development are facing even steeper increases, sometimes exceeding 30%.

That said, excess, D&O and cyber rates are all leveling off, said Papadopoulo. 

The Arch Capital CEO said that the “headwinds” have really been in cyber, which has put Arch’s substantial cyber book under pricing pressure. As a consequence, the re/insurer has diverted some of its capital away from cyber, certainly compared to one year ago. 

Other pockets of sunshine for Arch include excess of loss reinsurance in Florida, as local homeowner insurers creep back into the market.

But it has no plans to cater to small and medium-sized businesses (SMBs), as it is still digesting its $1.4 billion 2024 acquisition of Allianz’s US midcorp and entertainment insurance businesses from Allianz. 

“Small business is not an immediate action item down the road ... Let us focus on the middle market acquisition,” Arch Capital CFO François Morin told analysts. “There’s a lot we need to do with it, a lot we want to do with it. Things are going well but it’s still early days. There’s a lot of value that can generate from that asset. That’ll be the focus for the short term.”

Arch saw its combined ratio worsened to 81.2% in Q2 compared with 78.7% in the prior-year period. Combined ratio excluding cat activity and prior-year development was 80.9%, compared with 76.7% in Q2 2025.

Q2 net income was $1.2 billion, roughly the same as last year, but gross written premium (GPW) was up 15.1% to $6.2 billion.

But Q2 gross written premium (GPW) was up 15.1% to $6.2 billion compared with $5.3 billion in the prior-year period. 

Commenting on the results, Papadopoulo said: “We achieved these results by staying true to our core principle of cycle management. This disciplined underwriting approach, paired with dynamic capital management, positions us to consistently generate superior returns across market cycles.”

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