“Prosperity has returned to the US property and casualty industry …” So declared a recent report on the U.S. property and casualty insurance market. However, the report also cautioned about potential black clouds on the horizon.
The 2025 US Property and Casualty Insurance Market Report from S&P Global Market Intelligence forecast a calendar year combined ratio (losses plus expenses divided by premiums) of 99.2%. While still under the 100% underwriting breakeven point, this result is weaker than 2024’s 96.5%, primarily because of long-term exposures and the Los Angeles wildfires last winter. However, the report predicted combined ratios in profit territory through 2029.
A July 2025 report from Alera Group echoed these findings, pointing to greater stability in insurers’ profits, decelerating premium increases, and strong capacity in most coverage lines.
The S&P report predicted direct premium growth in almost all lines of coverage. The only forecast decline was in Workers’ Compensation where a slight decrease resulting from an increasingly sluggish labor market is expected. Government reports over the summer indicated that the job growth has reached a standstill. Also, rate competition caused by combined ratios that have been in the 80 to 90% range since 2017 will limit premiums.
Improvements in personal auto results have driven much of the profitability. Personal auto has a large impact on the P&C industry’s overall performance in part, as the report noted, because insurers do not reinsure the majority of the risks. However, a report from LexisNexis showed slowing premium growth as years of rate increases inspired record levels of policy shopping and switching by consumers.
Public policy changes are also having an effect on premiums. Florida insurance regulators are attributing an average 6.5% decrease in that state’s personal auto rates to legislative reforms enacted in recent years.
Double-digit premium growth from 2022 to 2024 enabled the homeowners line to eke out a small underwriting profit in 2024. The L.A. wildfires halted that improvement momentum; the report forecasts a 105.8% combined ratio this year.
Workers’ Compensation results are propping up the other commercial casualty coverages. The report forecasts a 90.3% combined ratio for Workers’ Comp but a much worse 107.8 for all other casualty coverages including product liability. “Fallout from social inflation continues to adversely affect the other liability business in particular,” the report said.
A study by the Insurance Information Institute and Milliman forecast poor results for commercial auto this year despite double-digit net written premium growth. Combined ratios for that line have been stuck well above 100% for more than 10 years. Commercial general liability also continues to struggle with persistently high loss ratios.
The commercial property insurance outlook this year is bright. The commercial multi-peril line broke an eight-year streak of underwriting losses in 2024 and is expected to finish this year slightly above breakeven at 99.8%. The commercial property line has shown underwriting profits each year since 2021, ending 2024 at a low 82.9%. That result was an outlier; the forecast for 2025 is a still healthy 90.5%.
The outlook for 2025 is a positive one, with some concern. For one thing, surplus lines insurers, who offer coverages that licensed insurers turn down, continue to grow their market share. Tariffs, can have some impact on the cost of claims. However, due to only part of the claim being impacted by the increase in tariffs along with competition, the impact should be modest. Labor is not affected by tariffs and this can often be a good portion of the claim.
Also, catastrophe losses, driven by the L.A. wildfires, are near record highs. Social inflation, nuclear jury verdicts, and third-party litigation funding are driving up liability insurance loss ratios. Regulators might not approve rate increases necessary to price for these trends. However file-and-use states are not impacted by this since the rates automatically go into effect and do not have excessive rate regulations.
Still, the U.S. P&C market is in its best shape in several years. If the expected trend plays out, there should be more coverage availability, more competition, and possibly a break for insurance buyers and their agents.
