AM Best: US P&C Upgrades Outpace Downgrades in 2025

Rating upgrades in the US property and casualty (P&C) insurance sector outpaced downgrades in 2025 for the first time in several years, supported by strong performance in commercial lines, according to a new AM Best report.

The report found that rating affirmations remained the most common action across the industry, accounting for 83.9 percent of activity in 2025, up from 77.7 percent in 2024. At the same time, the number of ratings placed under review fell by half, reflecting reduced merger and acquisition activity and a diminished impact from catastrophe events.

Insurers across the sector continued to face pressures from inflation and rising reinsurance costs. Personal lines writers, particularly homeowners insurers, also contended with elevated catastrophe losses, even though totals declined from 2024 levels. "Adding to this burden were more severe secondary perils, along with higher reinsurance costs and attachment points," said Helen Andersen, industry analyst at AM Best.

Commercial lines insurers demonstrated relative resilience, benefiting from consistent underwriting performance, favorable reserve development, and continued pricing momentum. These factors helped position the segment to better manage economic and social inflation.

Downgrades accounted for 4 percent of all rating actions in 2025, down from roughly 6 percent in the prior year. Upgrades declined slightly by about 1 percentage point but still exceeded downgrades overall. Most downgrades occurred among insurers in the homeowners and personal auto segments, driven by catastrophe-related losses, more frequent and severe secondary perils, and increased reinsurance costs and retentions.

Improved operating performance was the primary driver behind rating upgrades, representing 40 percent of such actions. Gains were supported by rate increases earning through, disciplined underwriting, and improved equity market conditions, despite ongoing volatility. Conversely, about one-third of downgrades were attributed to weak operating performance, as weather-related losses and inflation continued to weigh on results.

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