The U.S. property/casualty insurance industry delivered its strongest performance in the past decade in 2025, according to a new AM Best report. Improved pricing and higher investment income supported results, while carriers continued to manage persistent claim cost pressures and liability-driven volatility.
The annual Review & Preview Best’s Market Segment Report, titled “Rate Action and Investment Gains Drive US P/C Industry Results Despite Headwinds,” states that sustained pricing momentum and investment income growth across key lines of business drove performance in 2025. As a result, AM Best estimates that the P/C segment’s net underwriting income will more than double year over year to $39 billion in 2025. This growth occurred despite significant first-quarter losses from the California wildfires and other weather-driven events.
In addition, AM Best expects the calendar-year combined ratio to improve to 95.0 in 2025, compared with 97.1 in 2024. However, the report notes that rate and pricing trends across most major lines have stabilized or softened. As a result, AM Best believes underwriting results could face pressure in 2026. A severe catastrophe could also yield results worse than expected.
Outlook for 2026
AM Best expects lower net premiums written growth and tighter margins across the P/C industry in 2026.
“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.”
Segment Performance Trends
The personal lines segment is expected to continue improving in 2025. Private passenger auto and homeowners lines continue to maintain favorable trends.
Within commercial lines, workers’ compensation and commercial property drove underwriting profitability. These results helped offset unfavorable performance in commercial auto, general liability, including umbrella and excess coverage, and medical professional liability.
The report also states that social inflation and third-party litigation financing continue to challenge commercial lines insurers. Elevated loss severity trends affect commercial auto and general liability in particular.
“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 of 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.”
Reserve and Investment Highlights
AM Best reported that a re-estimation of the P/C industry’s ultimate reserves resulted in a revised overall reserve position for year-end 2024 reserves, including the statutory discount, to a $9 billion deficiency. This figure represents an improvement of almost $10 billion compared with the original estimate.
For liability lines, the development factors for loss and loss adjustment expense appear to be stabilizing. In contrast, workers’ compensation loss and loss adjustment expense development factors continue to trend upward, which weakens that line’s reserve position.
Meanwhile, higher reinvestment yields and solid equity market performance generated another year of double-digit investment income growth. As a result, investment income provided a critical earnings buffer against thin underwriting margins.
Industry Outlook
AM Best maintains a stable outlook on the overall personal and commercial lines segments of the P/C industry. The outlook reflects strong underwriting and capitalization levels, higher investment returns, and moderating reinsurance conditions.
The full market segment report, which includes AM Best’s outlooks for individual P/C lines of business, is available at 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. The company is headquartered in the United States and operates in more than 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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