AM Best Revises US Homeowners Insurance Outlook to Stable Amid Market Improvements

AM Best has updated the US homeowners insurance sector outlook to stable from negative, reflecting improved premium growth moderation and enhanced catastrophe risk management amid better property reinsurance market conditions. Despite significant catastrophe losses in early 2025, including wildfires and tornadoes, the market has shown resilience supported by improved capitalization and rate adequacy. The report emphasizes the ongoing strong demand for homeowners coverage driven by increased claims from severe weather events and economic uncertainties. Although premium growth remains robust, the rate of increase has slowed, supported by coverage expansions and pricing adjustments. The integration of advanced technologies such as AI, machine learning, satellite imagery, and smart home devices contributes to more accurate underwriting and pricing. AM Best highlights that top-performing insurers maintain solid risk-adjusted capitalization, though some carriers in high-risk regions have seen capital erosion due to prior severe loss events. The second half of 2025 experienced calmer hurricane activity, benefiting industry performance, yet pressures persist from secondary weather perils, inflation, tariff uncertainties, and regulatory challenges in key states. Property catastrophe reinsurance market conditions are improving with moderate softening of rates anticipated to continue into 2026 renewals. While reinsurers expect stabilization or minor price adjustments, primary insurers in catastrophe-prone states may see limited relief. Overall, enhanced reinsurance dynamics have eased some pressure on homeowners insurers but the segment remains vulnerable to weather-related volatility. This outlook adjustment underscores the complex interplay of market resilience, technological innovation, and the evolving risk landscape in shaping the US homeowners insurance segment's trajectory. Industry stakeholders should monitor reinsurance trends, regulatory developments, and inflationary impacts closely to navigate ongoing challenges.