U.S. Property and Casualty Insurance Industry Underwriting Profits Surge in 2025
The U.S. property and casualty (P/C) insurance industry recorded a remarkable improvement in underwriting profits for 2025, according to data from Verisk, the American Property Casualty Insurance Association (APCIA), and AM Best. Industry-wide pretax underwriting profits exceeded $60 billion, nearly tripling the figures from 2024. This success translated into a 3.7-point enhancement in the combined ratio, standing at 92.9 for the year.
This improvement was largely due to a reduction in the loss and loss adjustment expense ratios, contributing an approximate 4.5-point enhancement. While the overall loss values saw a slight decrease, earned premiums rose by over 6%. Robert Gordon from the APCIA attributed the industry stabilization to the absence of significant hurricanes landing on U.S. shores, which kept incurred losses flat.
Reports from Verisk and AM Best also highlighted fewer catastrophe losses and favorable loss reserve developments as key drivers for 2025's positive outcomes. Catastrophe losses accounted for 7.6 points of the loss ratio, a significant decrease from 8.8 points the previous year. Additionally, prior-year development contributed to a 2.1-point reduction in 2025’s loss ratio.
Verisk's Saurabh Khemka remarked that low catastrophe losses instead of a fundamental risk shift were pivotal to the favorable underwriting results. Khemka also mentioned enhancements in personal auto underwriting due to robust rate actions and disciplined practices, along with strong results in workers' compensation. However, he warned of challenges such as catastrophe variability, moderate rate momentum, and rising legal costs impacting 2026's outcomes.
Looking ahead, AM Best's David Blades expressed optimism, highlighting disciplined underwriting and improved premium adequacy as potential positives for 2026. He emphasized insurers' investments in technology, including predictive analytics and telematics, as critical for competitive differentiation. However, AM Best foresees potential moderation in rate momentum within segments like private passenger auto and commercial property, which could affect future profit margins.
David Paul from ALIRT Insurance Research similarly noted the evolving industry dynamics, citing a prolonged positive pricing cycle and technological investments as signs of shifting business practices. He anticipates a potentially prolonged yet shallow soft market cycle, focusing on sustained profitability through targeted expertise and structural changes.
Paul also addressed the U.S. P/C industry's robust financial health, highlighted by exceptional ALIRT scores and strong credit ratings. He stressed the need for disciplined pricing and underwriting amidst potential challenges from catastrophic events, economic volatility, and reinsurance market fluctuations. Both Blades and Paul plan to monitor these trends closely, with Blades confident that fundamental positives will continue to stabilize the P/C market.