Fitch Confirms Stable 2026 Outlook for US Property/Casualty Insurance Sector

A Steady Horizon for US P&C Insurers in 2026

Fitch Ratings has set a confident tone for the year ahead, issuing a stable fundamental outlook for the US property and casualty insurance sector. After a notably strong 2025, insurers are heading into 2026 with solid financial footing, healthier underwriting results, and a ratings landscape that continues to inspire confidence.

“The sector’s fundamentals remain exceptionally strong, supported by disciplined underwriting and resilient capital positions.”
Fitch Ratings

Momentum Built in 2025

The foundation for this stability was poured in 2025. Personal auto results rebounded, catastrophe losses came in lighter than anticipated due to a subdued hurricane season, and many carriers benefited from meaningful reserve releases. These ingredients helped drive the projected improvement in the industry’s combined ratio to 93.7% by year end, a level that reflects strong underwriting profitability.

Looking ahead, Fitch expects combined ratios to hold steady in 2026, hovering between 96% and 97%. While this signals some moderation, it still represents a healthy market capable of absorbing volatility and competitive pressures.

Earnings and Investment Outlook

Even as interest rates begin to soften, statutory net earnings are expected to rise compared with recent years. Carriers may see some pressure on net investment income, but book yields should remain supportive. Fitch projects a return on surplus of 10.1% for 2025 followed by 9.1% in 2026, reflecting the sector’s continued ability to generate value despite shifting economic conditions.

Just as notable is the overwhelming ratings stability across the sector. A striking 97% of rated insurers carry a stable outlook, with zero currently assigned to negative territory. Most financial strength ratings remain anchored in the A and AA categories, reinforcing market confidence.

“The industry continues to demonstrate resilience even as competitive and external pressures evolve.”
Fitch Ratings

Challenges Taking Shape

While the overall picture is encouraging, the industry is not without headwinds. Several forces could influence pricing discipline, reserve adequacy, and claims strategies in the coming years. Among the most closely watched concerns are:

• Softening premium rates and rising competitive pressure

• Increased severity from natural catastrophe volatility

• Expanding litigation risk and its impact on reserve strength

These areas will require ongoing vigilance, particularly as carriers navigate the interplay of economic shifts, regulatory changes, and judicial trends that continue to reshape risk profiles.

A Market Poised for Transformation

Fitch also points to a growing likelihood of merger and acquisition activity across the P&C landscape, as insurers respond to regulatory demands, capital challenges, and the need for scale. Consolidation trends could accelerate through 2026, reshaping both the competitive environment and capital structures.

For industry leaders, investors, and regulators, the current outlook offers a moment of clarity. Strong fundamentals, disciplined underwriting, and stable ratings form a sturdy platform, but adaptability remains crucial.

As the sector moves into 2026, the message is clear. Stability is the expectation, not the exception, yet the industry’s long term success will depend on how well carriers respond to evolving risks and opportunities in a rapidly changing market.