MALVERN, PA — The U.S. property and casualty insurance industry weathered a volatile 2025 and is on track for its strongest underwriting performance in more than a decade, even as wildfires, tariffs, and geopolitical uncertainty tested the sector, according to a new industry outlook.
The forecast, released by the Insurance Information Institute and consulting firm Milliman, projects that the industry will post its lowest Net Combined Ratio in over ten years, a key measure of underwriting profitability. The results come despite losses tied to the January 2025 Los Angeles wildfires and lingering economic pressures.
Industry economists said the broader U.S. economy remains stable, but risks are mounting beneath the surface. Michel Léonard, chief economist and data scientist at Triple-I, said stronger-than-expected economic growth masked growing vulnerabilities tied to political and geopolitical uncertainty. He warned that rising replacement costs could pressure insurers in 2026 and that an increase in unemployment toward the 5.0% level over the next six months could trigger an economic contraction or recession.
The outlook was complicated by a U.S. government shutdown in the fourth quarter of 2025, which delayed and disrupted economic data collection. Available figures suggest that underlying growth in the P/C sector is slowing, particularly in premium volume, as broader uncertainty intensifies.
Across all property and casualty lines, aggregate net premium growth for 2025 is expected to reach 5.9%, marking a slowdown from 2024. Homeowners insurance is forecast to post a Net Combined Ratio of 99.6, roughly in line with the prior year, despite wildfire-related losses early in 2025. Personal auto continues to improve, with a projected Net Combined Ratio of 94.4, although net written premium growth is expected to slow to 3.6%, its weakest pace since 2020.
Commercial lines remain more challenged. General liability and commercial auto are the only major segments expected to finish 2025 with Net Combined Ratios above 100, indicating underwriting losses, though gradual improvement is anticipated in 2026 and 2027. Workers’ compensation stands out as a bright spot, with ratios projected to remain in the high 80s to low 90s through 2027.
Patrick Schmid, chief insurance officer at Triple-I, said a relatively mild hurricane season and resilient homeowners performance helped drive the improved outlook. He said personal lines premium growth remains solid and that narrowing performance gaps between personal and commercial lines point to cautious optimism for the industry.
Milliman principal and consulting actuary Jason Kurtz said general liability continues to face severe pressure, with loss levels among the highest seen in decades. He said premium growth has not kept pace with rising losses, and additional increases will likely be needed to restore profitability.
Workers’ compensation performance is expected to remain favorable, supported by stable premiums, disciplined underwriting, and favorable prior-year development. Donna Glenn, chief actuary at National Council on Compensation Insurance, said recent data continues to show declining loss ratios, with no imminent reversal expected despite modest rate increases in some states.
Taken together, the projections suggest an industry regaining footing after years of disruption, but one that remains exposed to economic shocks, rising costs, and global uncertainty as it looks toward 2026.
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