MALVERN, PA — After several years of sharp premium increases and shrinking coverage options, the U.S. homeowners insurance market is beginning to show early signs of stabilization, according to a new Issues Brief from the Insurance Information Institute.
The report finds that the homeowners segment is projected to post double-digit net written premium growth in 2025, with a return to overall profitability expected in 2026. While that improvement may eventually support more stable pricing, insurers and consumers remain under pressure from elevated replacement costs, inflation, and persistent climate-related losses.
Homeowners insurance is forecast to record net written premium growth of 11.8 percent in 2025, slightly below recent years but still reflective of higher rebuilding costs and loss activity. The net combined ratio is expected to improve to 107.2, a 7.5-point gain from 2024, though it remains above break-even levels.
Underwriting performance showed notable improvement in the second quarter of 2025, when the direct incurred loss ratio fell to about 58 percent, the strongest second-quarter result in more than 15 years. That rebound followed a difficult first quarter driven in part by major wildfires in the Los Angeles area, which contributed to the worst first-quarter underwriting results since 2011.
Despite those gains, affordability remains a central concern for homeowners. Structural replacement costs have risen nearly 30 percent over the past five years, fueled by supply chain disruptions, higher material prices, and labor shortages. A 2025 Verisk report estimated total U.S. replacement costs reached $31 billion last year.
“Homeowners replacement costs have increased substantially due to ongoing supply chain issues and labor constraints,” said Sean Kevelighan, chief executive officer of the Insurance Information Institute. “Tariffs implemented this year are also expected to push claim payouts and premiums higher in the near term.”
Consumer stress around insurance costs remains elevated. A 2025 Nationwide survey found that 43 percent of homeowners cite rising insurance premiums as their top financial concern, while TransUnion data shows rate-shopping activity increased about 5 percent year over year in the first quarter of 2025.
Homeowners insurance accounted for 15.6 percent of all U.S. property and casualty premiums in 2024, making its performance a significant driver of the broader insurance sector. Economic premium drivers, which were negative in 2024, turned modestly positive in 2025, a shift that could support gradual market recovery. Analysts note that potential interest rate cuts may take up to a year to influence mortgage rates but could help boost housing starts by 2026 and 2027.
Climate risk continues to weigh heavily on insurers. While the 2025 Atlantic hurricane season passed without a major U.S. landfall for the first time since 2015, losses from other events remain severe. According to Gallagher Re, the U.S. has recorded 18 billion-dollar weather events so far this year, with all but one tied to severe convective storms such as thunderstorms, hail, and heavy rain. Those events have caused more than $61 billion in damage, marking the third consecutive year with such losses exceeding $50 billion.
The report also notes concern about proposed federal budget cuts to agencies such as NOAA, EPA, and NASA, which could limit access to climate and weather data used by insurers to assess and mitigate risk. Any shift of federal disaster responsibilities to states could increase financial strain on property owners, insurers, and local governments.
At the same time, technology is emerging as a stabilizing force. Insurers are increasingly using predictive analytics, artificial intelligence, aerial imagery, and smart home sensors to improve risk assessment, detect losses earlier, and resolve claims faster. According to a recent Insurance Research Council survey, homeowners familiar with these tools are more likely to view insurance pricing as fair and believe they receive better value from their coverage.
“Technology is reshaping the homeowners insurance market by enhancing risk management,” Kevelighan said. “Predictive analytics, AI and smart home tools allow insurers to better assess and prevent losses, which reinforces market stability and helps homeowners recover faster when disasters strike.”
The Institute said that while near-term affordability challenges remain, improving underwriting results and financial strength could help support a more resilient homeowners insurance market over the next several years.
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