AM Best: US P&C Results Surge in 2025, Pressure Looms

The US property-casualty (P&C) insurance industry delivered its strongest performance in a decade in 2025, driven by sustained rate increases and higher investment income, according to AM Best's annual Review and Preview Best's Market Segment Report. 

The report, titled "Rate Action and Investment Gains Drive US P/C Industry Results Despite Headwinds," estimates that the segment's net underwriting income will more than double year over year to $39 billion in 2025. The projected improvement comes despite significant first-quarter catastrophe losses tied to the California wildfires and other weather events. AM Best expects the calendar-year combined ratio to improve to 95.0 in 2025 from 97.1 in 2024. 

Pricing momentum and investment income gains across key lines supported results, but AM Best said most major lines have seen rate trends stabilize or soften, creating potential pressure on underwriting performance in 2026. A severe catastrophe could further weaken results. 

"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."

Personal lines are projected to post additional improvement in 2025, with private passenger auto and homeowners maintaining favorable trends. In commercial lines, workers compensation and commercial property generated underwriting profitability, offsetting weaker performance in commercial auto, general liability, including umbrella and excess coverage, and medical professional liability. AM Best cited social inflation and third-party litigation financing as ongoing challenges for commercial lines insurers, contributing to elevated loss severity in 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 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." 

The report also notes that a re-estimation of ultimate reserves resulted in a revised year-end 2024 reserve position, including the statutory discount, to a $9 billion deficiency, nearly $10 billion better than originally estimated. Liability line loss and loss adjustment expense development factors appear to be stabilizing, while workers compensation development factors continue trending upward, weakening its reserve position. 

Higher reinvestment yields and strong equity market performance produced another year of double-digit investment income growth, providing an earnings buffer against thin underwriting margins. AM Best maintains a stable outlook on the overall personal and commercial lines segments, citing strong underwriting performance, solid capitalization, higher investment returns, and moderating reinsurance conditions. 

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