US Property and Casualty Insurance Outlook: Growth Forecast for 2026-2027
US Property and Casualty Insurance Outlook: Modest Growth Forecast for 2026-2027
The US property and casualty insurance sector is set to experience moderated growth through 2026-2027, following peak underwriting profitability in 2025. This outlook stems from Swiss Re Institute's latest US Property & Casualty Outlook, forecasting changes influenced by various risk management and regulatory compliance requirements.
Future Premium Growth and Return on Equity
Analysis predicts premium growth slowing to 3% in 2026, with a slight uptick to 3.5% in 2027. This shift coincides with an anticipated softening in return on equity (ROE), which is expected to decline to 12% in 2026 and 10% in 2027, nearing cost-of-capital levels.
Recent Industry Performance
In Q3 2025, the industry's combined ratio was at 89%, marking the strongest quarterly performance in decades. According to AM Best, the US P&C sector recorded a net underwriting gain of $34.9 billion for the first nine months of 2025, a significant leap from the $3.7 billion during the same period the previous year. The combined ratio improved to 94.0%, driven by lower catastrophe losses and a 7% increase in net premiums earned. Additionally, policyholder surplus surged by 6.8%, nearing $1.2 trillion by 2025's end.
Market Dynamics and Investment Income
New capital infusion into the market has decelerated pricing hikes across insurance lines. By Q3 2025, premium growth had slowed to 4%, a decrease from the previous year's 9% for the same period, indicating a shift towards normative market conditions. Investment income exhibited incremental growth, with portfolio yields expected to reach 4.0% in 2026 and slightly increase to 4.1% by 2027, due to reinvestment in higher-yield securities.
Key Segment Developments
Personal auto insurance is poised to significantly influence the 2026 outlook. This segment's robust profitability in 2025 has led to rate reductions, potentially impacting broader industry outcomes as carriers and providers adjust underwriting strategies.
Conclusion
Swiss Re characterizes the upcoming period as a "return to norm" for the US P&C market. Profit margins, while still favorable, are expected to converge closer to historical averages as regulatory and compliance pressures evolve.
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