AM Best Updates Outlook for U.S. Homeowners Insurance to Stable

AM Best updated its outlook for the U.S. homeowners insurance market from negative to stable, reflecting moderating premium growth and improved catastrophe risk management. Despite elevated catastrophe losses in early 2025, the sector showed resilience, aided by a relatively quiet third quarter without significant hurricane activity. Demand for homeowners coverage remained steady, supported by economic and political uncertainty. Premium growth continued in 2025 but at a slower pace compared to prior years, driven by rate increases and expanded coverage needs amid inflation and macroeconomic pressures. Some insurers maintained strong capitalization and liquidity, while those operating in high-risk areas faced capital erosion due to severe weather events like California wildfires and national tornado outbreaks. Carriers responded by adopting technology to improve risk selection and loss mitigation, although rising homebuilding and construction costs pushed loss costs higher. Uncertainty surrounding tariffs also posed risks to cost stability, though no significant tariff impacts had been reported so far. The ongoing market volatility encouraged merger and acquisition activity, especially involving financially distressed companies. On the reinsurance front, property catastrophe rates softened moderately in 2025, helping alleviate pressure on primary insurers. However, insurers in catastrophe-prone states might experience less relief. AM Best expects further stabilization or minor reinsurance price adjustments in early 2026. Overall, the homeowners insurance segment remains exposed to weather-related volatility but benefits from improving reinsurance market dynamics and disciplined rate actions. AM Best will continue monitoring the market into 2026, providing updated segment outlooks to inform industry stakeholders.