AM Best Updates U.S. Homeowners Insurance Outlook to Stable Amid Market Resilience

AM Best has updated its market segment outlook for the U.S. homeowners' insurance sector to stable from negative, reflecting improvements in premium growth moderation and enhanced catastrophe risk management amid favorable property reinsurance market conditions. Despite significant catastrophe-related losses in early 2025, including wildfires and tornadoes, the market has demonstrated resilience, with a particularly quiet third quarter in terms of hurricane activity. Demand for homeowners' insurance remains high due to ongoing extreme weather claims and broader economic uncertainties. While premium growth remains robust, it has decelerated compared to the previous year, driven primarily by rate adjustments and increased coverage demands. Financially stable insurers maintain solid risk-adjusted capital and liquidity, though carriers in high-risk regions have experienced capital erosion due to losses from severe weather events. Rate increases are being pursued persistently to counter inflationary pressures and macroeconomic influences, with carriers leveraging technology to enhance risk selection and loss mitigation efforts. Elevated homebuilding and construction costs continue to exert upward pressure on loss costs, while tariff uncertainties pose potential risks to construction and repair expenses, though no significant tariff impact has yet been observed. The property catastrophe reinsurance market has experienced moderate rate softening in 2025, with expectations of further stabilization or minor pricing adjustments for January 2026 renewals. However, primary insurers in catastrophe-prone states may see less relief. Improved reinsurance dynamics have helped alleviate market pressures, bolstering the segment's resilience despite its inherent exposure to weather-related volatility. Increased merger and acquisition activities have been noted, particularly involving distressed companies, reflecting ongoing market volatility and pressure. AM Best will provide a comprehensive review of the 2026 market segment outlooks, including major U.S. insurance industry segments and delegated underwriting authority enterprises, in a scheduled online briefing. The stable outlook indicates a cautiously optimistic view of the homeowners’ insurance market stabilizing following a challenging period marked by significant weather events and economic challenges.