Resilience of U.S. Property and Casualty Insurance Sector in 2025
The U.S. property and casualty insurance sector showed remarkable resilience throughout a challenging 2025, setting the stage for its most robust underwriting success in over a decade. This achievement is particularly significant given the pressures from wildfires, trade tariffs, and geopolitical uncertainties, as highlighted in a recent report by the Insurance Information Institute and consulting firm Milliman.
The industry is projected to achieve its most favorable Net Combined Ratio in more than ten years, indicating substantial underwriting profitability. This success occurs despite financial setbacks associated with the January 2025 Los Angeles wildfires and ongoing economic strains.
Economists within the industry observed that while the broader U.S. economy appears stable, underlying risks are increasing. Michel Léonard, chief economist at Triple-I, remarked that unexpected economic growth has masked some vulnerabilities related to political and geopolitical events. He cautioned that rising replacement costs could place financial pressure on insurers in 2026, and increased unemployment may potentially trigger an economic slowdown.
The U.S. government shutdown in late 2025 complicated matters by hindering economic data collection, revealing a deceleration in growth within the property and casualty sector. This is particularly evident with premium volumes amidst growing regulatory compliance uncertainty.
Aggregate net premium growth across all property and casualty lines is expected to reach 5.9% for 2025, marking a decrease compared to the previous year. Despite early losses from wildfires, homeowners insurance is projected to maintain a Net Combined Ratio of 99.6. On the other hand, personal auto insurance is forecast to improve with a Net Combined Ratio of 94.4, though its premium growth is expected to slow to 3.6%, the lowest since 2020.
Challenges persist in commercial lines, with general liability and commercial auto expected to close 2025 with Net Combined Ratios above 100, indicating underwriting losses. However, gradual improvements are anticipated over the next two years. Conversely, workers' compensation insurance remains a strong performer, expected to maintain favorable ratios through 2027.
Patrick Schmid, Triple-I's chief insurance officer, noted that a mild hurricane season and robust homeowners insurance performance have contributed positively to the industry's outlook. He emphasized ongoing solid personal lines premium growth and the shrinking performance gap between personal and commercial lines as positive industry indicators.
Jason Kurtz of Milliman highlighted severe pressures in general liability, with historical peaks in loss levels, noting premiums have lagged behind these rising losses, necessitating potential increases for profitability restoration. Workers' compensation is expected to thrive with stable premiums and disciplined underwriting. Donna Glenn, chief actuary at the National Council on Compensation Insurance, pointed to ongoing favorable data with declining loss ratios and minimal expectations for reversal, despite slight rate increases in certain states.
Overall, the projections indicate an industry finding its stride post-disruption, albeit still susceptible to economic fluctuations, escalating costs, and ongoing global uncertainties as it progresses into 2026.