After a challenging few years, the U.S. property-casualty insurance markets appear to have turned a corner in 2025. As these trends continue into 2026, independent agencies will have new opportunities for success.
The markets saw much good news this year, including:
Large gains in underwriting profits. A.M. Best reported that P&C underwriting profit during the first three quarters of 2025 was $35 billion, up from $4 billion in the same period in 2024. Policyholder surplus grew by nearly 7% during the period. These results should give carriers incentives to write insurance more aggressively in 2026. Agencies should have significant opportunities to move business back to admitted carriers and out of the surplus lines market, which has grown to a record size.
Personal auto results have done a 180. After three consecutive years of underwriting losses in the first two quarters, the first six months of 2025 produced a loss ratio six points lower than 2024 and 16 points lower than 2023. Insurers are reacting: State Farm has requested approval for a 6.2% rate decrease in California for early 2026.
Low catastrophe losses. The big reason for the improved underwriting results was a relatively quiet year of catastrophe losses. It started ominously with the Los Angeles wildfires in January, but the hurricane season was subdued – no hurricanes made landfall in the U.S. The number of wildfires increased but the acreage burned fell from 8.5 million to 4.9.
Reinsurance rates are dropping, at least for property. Fitch Ratings recently called the P&C reinsurance market a “buyer’s market” and predicted property reinsurance rate decreases on top of those seen this year. Social inflation, among other concerns, are keeping the casualty reinsurance market tight.
Consequently, carriers are re-entering property insurance markets. Earlier this month, A.M. Best revised its outlook for the homeowners insurance market from “negative” to “stable.” Late last year, Farmers announced that it would write more homeowners business in wildfire-plagued California. Florida has seen 17 carriers enter the market since it enacted insurance reforms.
Insurance stock prices are up. The Dow Jones U.S. P&C Insurance Index has risen nearly 5% this year, the S&P 500 Property & Casualty Insurance Sub-Industry Index has held steady, and the KBW Nasdaq Property & Casualty Index has jumped more than 6%.
All these factors indicate that P&C carriers as a group are healthier. This should give agencies new options for rolling books of business to aggressive carriers. That will in turn solidify their hold on accounts and insulate them from competitors attempting to get the business through broker of record letters.
Lower interest rates. Amid signs of growing weakness in the labor market, the Federal Reserve reduced the key interest rate it controls three times in the fourth quarter of 2025 by a total of 0.75%. As these reductions filter down through the banking system, the cost of business loans for mergers and acquisitions and other purposes should decline. M&A opportunities should only increase – one-third of agency principals are in their 60s and one out of five are older than 66.
Lower interest rates may also aid the startup of new agencies. Captive agents chafing under the constraints in that world may now find it feasible to break off and open independent agencies. Independents who sold their agencies may tire of working for the new owners and leave to start new ventures.
Agencies will see other avenues for growth in 2026. Despite the growth in the cyber insurance market over the past several years, Munich Re reported this year that small- to medium-sized enterprises are largely uninsured. A recent report showed that slightly more than a quarter of small businesses made employment practices liability insurance claims in 2024, suggesting that many still lack this essential coverage.
Because of the improving results and continued coverage gaps, independent agencies should have plenty of opportunities to grow in the new year, whether organically or by merging with other agencies. With years of hard market conditions hopefully in the rearview mirror, agencies are poised for a good 2026.
