Success for the property/casualty industry in 2025 was marked by rate increases and investment income, but plateauing or softening rates in many lines of business in 2026 may pressure financial results in 2026, said AM Best.
In a new report, the insurance industry financial rating analyst said it expects lower net premium growth in 2026 and has predicted that P/C industry combined ratio will increase 1.9 points to 96.9.
“Macroeconomic headwinds, including rising claims costs attributable to higher prices of materials required for home, commercial property and auto physical damage repairs, will likely lead to a slightly higher industry loss ratio,” said Jacqalene Lentz, senior director at AM Best, said in a statement.
In 2025, continued rate increases benefitted overall financial results and offset adverse trends such as social inflation, nuclear verdicts, and litigation financing, especially in general liability, said AM Best. Net premiums written increased 6.1% in 2025 compared with 8.7% in 2024. For most lines of business seeing premium growth, AM Best reported that the magnitude diminished throughout 2025 and into 2026. Cyber, D&O, commercial property and workers’ compensation recorded lower renewal pricing in 2025 compared with 2024.
The 95 combined ratio in 2025 improved on 2024’s combined ratio of 98—the first time under 100 in three years. State regulators’ approval of rate filings helped personal lines, as did insurers’ adoption of technology to improve underwriting and efficiency. However, home and auto could see profit margins squeezed in 2026 thanks to rising repair costs and higher fatality rates in auto.
“The segment should generate solid results, but with premium volume expected to be constrained as year-over-year rate changes flatten,” AM Best said.
Lower net premium growth in 2026 for commercial lines will lead to a higher combined ratio of 96.3 compared with 95.8 in 2025, AM Best estimated. Three commercial lines of business—auto, medical professional liability, and other/products liability turned in combined ratios over 100 in 2025 (103.5, 106, and 108, respectively).
Net loss and loss adjustment reserves, often the largest liability to an insurers’ balance sheet and a leading cause of insolvency, remains a critical issue for AM Best, who said a re-estimation of the P/C industry ultimate reserves resulted in an overall reserve position for year-end 2024 reserves, including the statutory discount, to a $9 billion deficiency, almost $10 billion better than originally estimated.
AM Best also noted in the report that the flow of risk to the excess & surplus market “was one of the defining factors” of 2025. Admitted carriers increasingly avoided risks in property, auto liability, and high-hazard casualty lines, but the E&S market jumped in to provide flexibility and customization.
Topics
Pricing Trends
AM Best
Property Casualty
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