AI Rules Just Changed
In Force Weekly: Federal AI preemption forces hard calls on product, governance, and risk in 2026
This Week’s Strategic Signals for P&C Carrier and Insurtech Executives
Overall: Federal AI preemption simplifies the map and destabilizes execution.
Personal Lines: Split rate actions are straining multi-line retention.
Commercial: Reinsurance relief favors carriers that move first.
Cyber: Credential value now defines cyber loss severity.
Each section also includes ‘other signals on our radar.’ Write back and let us know if you’d like to see more detail on any of those.
Later this week, we will publish a deep dive on the most pressing signal from this brief.
If there are other topics you would like us to examine in depth, reply and let us know.
In Force is a weekly intelligence brief for P&C Insurance executives, delivering high-impact developments shaping the P&C space: what happened, why it matters, and what to do about it. It is designed for carrier and insurtech strategy, product management, marketing, sales, broker/agent relations, and innovation teams. Each issue distills complex shifts into decision-grade insight.
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1. Overall
Trump Administration Issues Executive Order on National AI Regulation Framework
What Happened
On December 11, 2025, President Donald Trump signed an executive order titled “Ensuring a National Policy Framework for Artificial Intelligence,” aimed at establishing a preemption-oriented national AI framework to limit conflicting or burdensome state-level AI regulation and avoid a patchwork of state rules. The order directs the Attorney General to establish an AI Litigation Task Force within 30 days to challenge state AI laws deemed unconstitutional, preempted by federal law, or otherwise unlawful. It instructs the Department of Commerce, within 90 days, to publish an evaluation identifying “onerous” state AI laws for potential referral to the Department of Justice. The order also directs the Federal Trade Commission and Federal Communications Commission to clarify how their existing authorities may preempt conflicting state AI requirements. The executive order explicitly excludes certain domains from proposed preemption, including child safety, AI data center infrastructure, and state government procurement.
Why It Matters
This federal action creates significant uncertainty for the insurance industry operating across multiple states with varying AI regulations. Insurance carriers have been increasingly implementing AI exclusions for general liability coverage and developing policies around AI chatbot errors. The Trump administration’s push for federal preemption could either simplify compliance by creating uniform national standards or create prolonged legal challenges that extend uncertainty. Insurers must monitor potential litigation and outcomes as federal and state governments clash over regulatory authority, particularly given that several state insurance commissioners and regulators have expressed concerns about these restrictions.
Implications for P&C Executives
Compliance centralization becomes mandatory, not optional. State-by-state policy teams lose relevance as carriers consolidate AI governance, legal interpretation, and regulator engagement at the enterprise level.
AI product timelines will slip before they accelerate. Legal uncertainty will push risk committees to slow or pause AI-driven underwriting, pricing, and claims initiatives rather than absorb regulatory exposure.
Live AI deployments need an exit strategy. Carriers with models already in production must design fallback workflows to avoid forced pullbacks if federal or state standards change midstream.
Distribution conversations get riskier, not easier. Sales and broker teams will need tighter messaging and clearer disclosures as AI usage moves from a differentiator to a compliance liability.
Other Overall Signals on our Radar:
AM Best Reports Sharp Rebound in P&C Underwriting Profitability
AM Best reported that the U.S. property and casualty industry generated a thirty five billion dollar net underwriting gain in the first nine months of 2025, a dramatic increase from roughly four billion dollars in the same period last year. The improvement was driven by lower third quarter catastrophe losses and sustained premium growth. Net premiums rose seven percent year over year while losses and loss adjustment expenses were essentially flat. The combined ratio improved to ninety four point zero, with catastrophe losses contributing about eight points, materially lower than in the prior year.
2. Personal Lines (Home, Auto, etc.)
State Farm Receives Louisiana Insurance Commissioner Approval for Divergent Rate Actions
What Happened
On December 12, 2025, Louisiana Insurance Commissioner Tim Temple approved State Farm’s request for a 5.9% average rate decrease on personal auto insurance for more than 1,066,000 policyholders, effective January 1, 2026. At the same time, he approved State Farm’s 9.7% average increase on homeowners insurance affecting over 300,000 policyholders, effective immediately for new business and December 15, 2025, for renewals. State Farm attributed the homeowners increase to updated hurricane modeling projecting higher future losses and increased non-catastrophe loss experience. Commissioner Temple linked the auto rate decrease to lower loss costs and reduced claim frequency, noting that a January 2025 winter storm significantly reduced driving and accidents.
Why It Matters
This approval demonstrates the divergent market dynamics between auto and homeowners lines in coastal states. The auto decrease reflects improved profitability from frequency reductions, enabling carriers to compete more aggressively in this line. Conversely, the homeowners increase reveals persistent catastrophe modeling concerns and non-catastrophe loss pressures that reinsurance cost declines have not fully offset. For brokers and agents managing multi-line relationships, this creates complexity in customer communications—agents must explain why the same carrier is lowering auto rates while raising homeowners rates. For product and sales teams, this underscores the importance of line-specific positioning and the need to develop targeted retention and growth strategies that acknowledge these divergent pressures.
Implications for P&C Executives
Split rate actions fracture the customer experience. Multi-line retention will deteriorate unless product, pricing, and agent teams coordinate line moves and renewal narratives tightly.
Coastal profitability assumptions are no longer safe. Carriers leaning on rate and model adequacy in exposed property books need to reassess CAT severity, tail risk, and capital tolerance.
Reinsurance dependence remains the choke point in homeowners. Pricing agility will matter more than forecast precision as climate volatility continues to outpace annual planning cycles.
Agent credibility is under strain. Without better tools and guidance, agents will struggle to explain divergent line actions without eroding trust or cross-sell momentum.
Other Personal Lines Signals on our Radar:
Florida Citizens Signals First Homeowners Rate Cut in a Decade
Florida’s Citizens Property Insurance board voted to recommend an average two point six percent rate decrease for personal lines, the first homeowners cut since 2015. About three in five policyholders would see average reductions of roughly eleven point five percent, or about three hundred fifty nine dollars annually. The board cited falling litigation costs following reforms that eliminated one way attorney fees and assignment of benefits. Citizens’ policy count is projected to fall to about three hundred eighty five thousand by year end, down seventy three percent from its 2023 peak, reinforcing the shift of risk back to the private market.
3. Commercial
Reinsurance Market Expects 10-15% Catastrophe Rate Declines for January 1, 2026 Renewals
What Happened
On December 12, 2025, Amwins released its latest State of the Market report, indicating that property catastrophe reinsurance rate declines are continuing but trending toward moderation as the January 1, 2026 renewal season approaches. After earlier reductions of roughly 30–40%, Amwins expects further decreases to narrow to about 10–15%, assuming no major global catastrophe losses. The report notes that underwriting standards have loosened modestly, with reinsurers deploying larger line sizes and showing greater flexibility, particularly in higher excess layers with limited catastrophe exposure. At the same time, reinsurers remain cautious in high-hazard areas exposed to convective storms, wildfires, and flooding, using refined underwriting models and selective deductibles, especially for wildfire and water damage.
Why It Matters
The moderation in rate decline expectations provides clarity for primary insurers’ January renewals and capital deployment decisions. The 10-15% range (versus prior 30-40% declines) reflects reinsurers reasserting market discipline as capacity proves abundant and competition intensifies. Primary carriers should prepare for selective pricing by layer: higher layers may see steeper declines (potentially 20-25%) while lower layers see modest reductions near 10%, according to Amwins’ observations. For commercial underwriting and pricing teams, this trend supports pursuit of expanded coverage limits and broader risk appetites on clean accounts while maintaining disciplined underwriting on complex or loss-affected risks.
Implications for P&C Executives
Mid-cycle relief rewards speed, not patience. Carriers able to deploy capacity now gain leverage, while buyers who waited risk missing the window.
Clean books finally matter again. Strong loss experience gives underwriters negotiating power to secure better treaty structures before volatility resurfaces in 2026.
The sales story has to evolve. Leaders need to pivot from cost containment to coverage differentiation before market loosening flattens the message.
Higher layers are opening, but risk tolerance is shrinking. Expanded limits create opportunity, yet accumulation discipline becomes less forgiving as flexibility increases.
4. Cyber
TransUnion Report Warns of Escalating Hyper-Targeted Fraud and Evolving Data Breach Landscape
What Happened
In December 2025, TransUnion published analysis highlighting that U.S. data breaches are becoming more severe, with attackers increasingly focused on hyper-targeted, high-value identity credentials such as Social Security numbers, driver’s licenses, and financial account data rather than broad, low-value exposures. The research emphasizes that while overall breach volumes previously declined, the sensitivity and usability of exposed data have increased, fueling automated fraud across email, online, phone, and text channels, including identity theft, account takeover, and synthetic identity creation. TransUnion’s consumer research indicates that roughly 29% of consumers globally report losing money to fraud, with typical losses around $1,700 rather than extreme averages. The analysis also notes that automated exploitation of known vulnerabilities and third-party relationships is expanding the impact of breaches beyond large enterprises to small and mid-size organizations. These trends imply continued growth in fraud-related financial losses and more complex cyber-related claims exposure for insurers.
Why It Matters
This development directly impacts cyber insurance underwriting, claims management, and regulatory risk assessment. The shift toward high-value data extraction increases claims severity and the likelihood of class action litigation tied to specific data exposures. Cyber insurers must refine risk assessment models to account for data sensitivity, not just breach frequency or organization size. Smaller organizations’ growing risk profile challenges traditional market segmentation, requiring carriers to develop targeted cyber products for SMBs with appropriate pricing.
Implications for P&C Executives
Credential-driven breach severity reshapes cyber pricing. Carriers will see sharper segmentation in SMB books as data sensitivity, not just breach frequency, determines profitability.
Cyber policy language is moving into the courtroom. Ambiguity around emotional distress and fraud restoration is now a litigation risk that requires immediate wording cleanup.
Generic cyber products are losing credibility. Brokers without data-value assessment tools will struggle to compete as buyers demand clearer risk justification.
Reserving logic is shifting upstream. Breach-linked restitution exposure will increasingly influence cyber capital planning and loss scenarios.
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