MALVERN, PA — U.S. property and casualty insurers posted their strongest underwriting performance in more than a decade during 2025 as premium increases and easing replacement-cost inflation improved profitability, though catastrophe exposure, litigation costs, and economic uncertainty continue pressuring several major commercial lines.
The industry’s net combined ratio reached its lowest level in over 10 years, according to projections released by Insurance Information Institute and Milliman, marking a significant recovery after years of weather-related losses, elevated claims severity, and inflation-driven cost increases.
The improvement was led by personal auto and homeowners insurance, where prior pricing actions and moderating repair and reconstruction costs strengthened underwriting margins despite continued catastrophe activity.
Personal auto recorded a 2025 net combined ratio of 91.8, improving 3.5 points from the prior year, while homeowners insurance posted a ratio of 88.1, its strongest underwriting result in more than a decade.
The report projected underlying property and casualty growth of negative 3.7% during the first half of 2026, compared with 1.6% growth in 2025, before conditions potentially stabilize in 2027 and 2028.
Industry economists cautioned that improving underwriting conditions remain vulnerable to macroeconomic and catastrophe-related pressures.
“Although conditions have stabilized somewhat, insurers continue to operate in an environment marked by elevated catastrophe risk, higher claims severity and ongoing economic uncertainty,” stated Michel Léonard, chief economist and data scientist at Triple-I.
The analysis highlighted continuing inflationary pressure across the broader economy even as replacement-cost growth slowed from peaks reached in 2022. U.S. consumer inflation remained at 3.3% in March while first-quarter real GDP growth slowed to 2.0%.
Replacement-cost growth is projected at 2.1% during the first half of 2026 before accelerating again later in the decade, a trend expected to sustain pressure on underwriting discipline across property-related lines.
“Replacement costs moderated significantly from their 2022 peak, but our forecasts show them re-accelerating through 2028 and eventually outpacing overall U.S. inflation,” stated Patrick Schmid, chief insurance officer at Triple-I.
Commercial auto and general liability remained the industry’s weakest-performing major segments, with both continuing to operate above a 100 net combined ratio, reflecting persistent underwriting losses.
Milliman principal and consulting actuary Jason Kurtz attributed those pressures largely to litigation trends and rising claims severity.
“Litigation pressures and claims severity trends continue to result in elevated loss costs, constraining improvement in these segments despite broader industry strength,” Kurtz stated.
Workers’ compensation remained one of the industry’s most profitable lines, with combined ratios projected to remain in the low 90s through 2028.
Donna Glenn, chief actuary at NCCI, noted the workers’ compensation combined ratio increased about five points in 2025 to 91 due primarily to higher loss and underwriting expense ratios.
The report also pointed to weakening employment trends within the insurance sector. Industry employment fell 1.8% year over year in March, trailing broader labor market performance as insurers continue managing operating costs alongside rising claims exposure.
Support the local news that supports Chester County. MyChesCo delivers reliable, fact-based reporting and essential community resources—free for everyone. If you value that, click here to become a patron today.