Best’s Market Segment Report: Rate Actions, Investment Gains Drive US Property/Casualty Insurance Segment’s 2025 Results; Headwinds May Pressure Carriers in 2026

OLDWICK, N.J.--(BUSINESS WIRE)--The U.S. property/casualty (P/C) industry produced its strongest performance of the past decade in 2025, reflecting the combined benefits of improved pricing and investment income, offsetting persistent pressure on claim costs and liability-driven volatility, according to a new AM Best report.

The annual Review & Preview Best’s Market Segment Report, “Rate Action and Investment Gains Drive US P/C Industry Results Despite Headwinds,” notes that the U.S. P/C insurance industry experienced sustained momentum on pricing and investment income across key lines of business, and as a result, AM Best is estimating that the P/C segment’s net underwriting income will more than double year over year to $39 billion in 2025, despite significant first-quarter losses from the California wildfires and other weather-driven events. AM Best also expects the calendar-year combined ratio to improve to 95.0 in 2025 from 97.1 in 2024. However, rate and pricing trends for most of the major lines of business have since stabilized or softened, which AM Best believes will pressure underwriting results in 2026. A severe catastrophe also could lead to results worse than expected.

“AM Best expects lower net premiums written growth in 2026 and tighter margins across the P/C industry in 2026,” said Jacqalene Lentz, senior director, AM Best. “Macroeconomic headwinds, including rising claims costs attributable to higher prices of materials required for home, commercial property and auto physical damage repairs, will likely lead to a slightly higher industry loss ratio.”

The personal lines segment is expected to show further improvement in 2025, with the private passenger auto and homeowners’ lines maintaining favorable trends. Some commercial lines of business, particularly workers’ compensation and commercial property, drove the commercial segment’s underwriting profitability, helping to offset unfavorable results for commercial auto, general liability (including umbrella and excess coverage), and medical professional liability. Social inflation and third-party litigation financing remain challenging for commercial lines’ insurers because of elevated loss severity trends, which impact commercial auto and general liability.

“Lower net premium growth due to declining rate levels across several commercial lines is projected to lead the segment to a combined ratio that will be a couple points higher in 2026, but still reflecting underwriting profitability,” said Anthony Molinaro, associate director, AM Best. “Personal lines’ profit margins are likely to be squeezed in 2026. The segment should generate solid results, but with slightly higher underwriting ratios and slightly lower operating returns.”

Other highlights from this report include:

• A re-estimation of the P/C industry ultimate reserves resulted in a revised overall reserve position for the year-end 2024 reserves, including the statutory discount, to a $9 billion deficiency, almost $10 billion better than originally estimated.
• For liability lines, loss and loss adjustment expense development factors appear to be stabilizing. By contrast, the workers’ compensation line’s loss and loss adjustment expense development factors are still trending upward, weakening its reserve position.
• Higher reinvestment yields and solid equity market performance produced another year of double-digit investment income growth, providing a critical earnings buffer against thin underwriting margins.
• AM Best maintains a stable outlook on the overall personal and commercial lines segments of the P/C industry, reflecting strong underwriting and capitalization levels, as well as higher investment returns and moderating reinsurance conditions.

To access the full copy of this market segment report, which includes AM Best’s market segment outlooks for individual P/C lines of business, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=362660.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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