The report noted that catastrophe losses remained elevated in the first half of 2025. Even so, the homeowners segment showed resilience. AM Best pointed to the third quarter of 2025 as a notable break in catastrophe activity, describing it as exceptionally quiet for land-falling hurricanes. Despite that short-term lull, insurers continued to face high claim activity linked to extreme weather. The report also said that general economic and political uncertainty supported ongoing demand for homeowners coverage.
Premium growth remained robust in 2025, although AM Best noted that the pace slowed compared to the prior year. The report attributed growth to continued rate activity and expanded coverage demands. Carriers sought higher rates to maintain and preserve adequate pricing levels, particularly in light of inflationary pressures and broader macroeconomic factors. AM Best stated that material rate increases, combined with increased inflation guard factors, served as the main drivers behind premium growth across the segment.
Performance trends within the segment varied by carrier. Maurice Thomas, senior financial analyst at AM Best, said that better performers in homeowners insurance maintained solid risk-adjusted capitalization and enough liquidity. However, the report also found that some carriers operating in high-risk areas saw their capital cushions erode. Those declines resulted from material operating losses tied to severe events. AM Best highlighted recent impacts from January wildfires in California and severe tornado outbreaks nationwide during the first half of 2025.
In response to these pressures, carriers expanded their use of technology. The report stated that insurers became more effective at leveraging technology to enhance risk selection and support loss management and mitigation. Even with these operational improvements, carriers still faced higher underlying cost trends. AM Best described a “new norm” of elevated homebuilding and construction costs, which pushed loss costs upward. The report added that uncertainty around tariffs increased the potential for higher construction and repair costs. However, AM Best stated that no meaningful tariff impact had been reported to date.
The report also linked continued volatility and lingering market pressures to greater interest in merger and acquisition activity. AM Best said this interest was particularly notable for materially distressed companies.
On the reinsurance side, the report noted moderate softening in property catastrophe reinsurance rates during 2025. Thomas said January 2026 renewals should bring further stabilization or minor price shifts. At the same time, the report cautioned that primary carriers in catastrophe-prone states may see less relief relative to others. Overall, AM Best said improving reinsurance dynamics in 2025 helped reduce pressure on homeowners insurers and supported segment resilience. Nevertheless, the company emphasized that the segment remains inherently exposed to weather-related operating volatility.
AM Best will continue to review market conditions as we head into 2026. Leading analysts are scheduled to present 2026 market segment outlooks for major U.S. insurance industry segments. The online briefing is on Tuesday, Dec. 9, 2025, at 2:00 p.m. EST.
AM Best operates as a global credit rating agency, news publisher, and data analytics provider focused on the insurance industry. The company is headquartered in the United States and operates in over 100 countries. It maintains regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City.
Taken together, the report framed 2025 as a year of ongoing catastrophe exposure, steady but slower premium expansion, and gradual improvement in reinsurance conditions.
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