Fitch Ratings Forecasts Stable U.S. P/C Insurance Results in 2026 Amid Softening Premium Growth

Fitch Ratings projects that the U.S. property/casualty (P/C) insurance sector will experience underwriting results in 2026 similar to those seen in 2024, with premium growth moderating to approximately 3-4 percent. This outlook was delivered by Fitch senior directors Tana Marcom and Chris Grimes during a recent North American P/C Credit Outlook webinar. Fitch highlights that the U.S. P/C sector has reported historically strong underwriting results through 2025, with a combined ratio forecasted at 94 for the full year, representing the best industry performance in over 15 years and notably better than the 2024 combined ratio of about 97. Key factors supporting the favorable results include a lack of landfalling hurricanes in 2025 and significant favorable prior-year loss reserve development totaling $18 billion through the third quarter, nearly double the level from 2024. Fitch expects underwriting profitability to continue into 2026, though with combined ratios increasing slightly back to the 96-97 range, aligning with 2024 levels. Both personal and commercial lines are anticipated to achieve combined ratios near 94 in 2025, with commercial lines marking their fifth consecutive year of profitability. Personal lines results have benefited from ongoing private passenger auto insurance rate increases over 30 consecutive quarters and reduced catastrophe losses. Despite rising loss severity and potential tariff impacts, loss frequency in private passenger auto lines is improving, credited to enhanced vehicle safety features. Homeowners insurance continues to face substantial incurred losses driven by California wildfires and severe storms, yet reinsurance market capacity is ample, creating a buyers' market that may lead to softening reinsurance rates in 2026. Fitch expects rate hikes and underwriting discipline to support homeowners insurers’ profitability despite anticipated return of hurricane losses. Premium growth rates have moderated due to softer private passenger auto rates and declining property line rates, with 2025 premium growth at about 5 percent year-to-date down from higher levels in prior years. Carriers are pivoting towards retention and new business growth through increased advertising and modest rate increases amid a rational and disciplined competitive environment. Economic indicators such as labor market conditions also influence premium growth outlooks, particularly for commercial lines. Pricing trends vary, with some lines like workers’ compensation and cyber seeing stabilization or modest rate improvements expected, while commercial auto and excess and umbrella liability lines remain pressured. The reinsurance landscape exhibits continued strong pricing, especially for casualty coverage linked to social inflation exposure, but primary insurers’ rate actions may offset reinsurance cost pressures. The reinsurance buyers’ market is evolving after significant price adjustments in prior years, with risk-adjusted reinsurance pricing expected to decline 5-10 percent in the coming renewal period. Fitch maintains a neutral outlook for the North American P/C insurance sector, anticipating stable operating and business conditions. The industry’s capital position remains robust, with policyholders surplus growing 24 percent over three years to $1.2 trillion as of September 2025 and forecasted to increase another 5 percent in 2026, providing resilience against macroeconomic shocks. Mergers and acquisitions activity is increasing as insurers seek to deploy capital, enhance diversification, and pursue growth opportunities amid softening premium rates. Recent transactions include AIG acquiring Everest’s global primary retail renewal rights, Nationwide acquiring Markel’s reinsurance renewal rights, Sompo’s acquisition of Aspen Bermuda, and Mitsui Sumitomo’s stake in W.R. Berkley, which also saw Japanese ownership of over 12.5 percent of its stock materialize. These market dynamics reflect ongoing strategic realignment and international expansion amid a shifting competitive and regulatory landscape for U.S. P/C insurers.