The Industry’s Best Performance in Over a Decade Masks Emerging Vulnerabilities
The U.S. property/casualty insurance sector closed 2025 with its strongest underwriting performance since 2014, achieving a Net Combined Ratio that signals fundamental improvement across most product lines. According to the latest analysis from the Insurance Information Institute (Triple-I) and actuarial consultancy Milliman, this achievement comes against a backdrop of substantial challenges: the devastating Los Angeles wildfires in January 2025, escalating tariff policies, and mounting geopolitical tensions that continue reshaping global markets.
Yet beneath this positive headline, industry analysts identify troubling undercurrents that could erode profitability in 2026 and beyond. Premium growth is decelerating across nearly all lines of business, replacement cost inflation threatens to outpace revenue gains, and certain commercial segments remain stubbornly unprofitable despite years of pricing corrections.
Personal Lines Deliver Stability While Commercial Segments Face Pressure
Homeowners insurance demonstrated remarkable resilience throughout 2025, maintaining a Net Combined Ratio of 99.6 points—essentially matching 2024’s performance despite absorbing losses from the Los Angeles catastrophe. This stability stems partly from favorable natural catastrophe activity in the latter half of the year, when hurricane season notably spared the continental United States from major landfalls that have historically driven industry losses.
Personal auto insurance continued its recovery trajectory, with the Net Combined Ratio improving to 94.4 points. However, this improvement masks a concerning deceleration in premium growth, which slowed to just 3.6 percent—the weakest expansion since the pandemic-disrupted year of 2020. This slowdown reflects intensifying market competition and consumer price sensitivity as inflation-weary households scrutinize discretionary spending.
The commercial insurance landscape presents a more nuanced picture. Workers’ compensation continues its multi-year streak of strong profitability, with Net Combined Ratios forecast in the high-80s to low-90s range through 2027. Disciplined underwriting, stable claim trends, and favorable development from prior accident years have created a virtuous cycle in this historically volatile line.
General Liability and Commercial Auto Remain Profitability Challenges
General liability insurance represents the industry’s most persistent profitability challenge, with 2025 performance tracking among the worst results recorded in over a decade. Direct incurred loss ratios in the third quarter reached levels unseen in at least 25 years, according to Milliman’s analysis. While actuaries project gradual improvement extending into 2026 and 2027, the fundamental issue persists: premium growth, though positive, fails to keep pace with accelerating loss trends.
Commercial auto insurance similarly remains above the critical 100-point combined ratio threshold, indicating continued underwriting losses. Both segments face the dual challenge of soft market conditions in certain coverage areas coupled with loss cost inflation that outstrips premium adjustments.
Economic Crosscurrents Threaten 2026 Outlook
Looking ahead, industry economists point to several macroeconomic warning signs that could disrupt the sector’s momentum. The unemployment rate’s gradual drift toward 5.0 percent—a threshold historically associated with economic contractions—poses particular concern. Rising unemployment typically correlates with reduced commercial activity, lower premium volume, and increased loss frequency in certain lines.
Data collection challenges stemming from the fourth-quarter 2025 government shutdown have introduced analytical uncertainties, creating gaps in the economic intelligence insurers rely upon for pricing and reserving decisions. Combined with ongoing tariff implementation and geopolitical instability, these factors suggest 2026 may test the industry’s recently fortified balance sheets.
Aggregate net premium growth across all property/casualty lines is projected at 5.9 percent for 2025, representing further deceleration from 2024’s pace. This moderation in top-line growth, coupled with potential replacement cost inflation, could compress underwriting margins and challenge the industry’s current favorable profitability trajectory. Insurers entering 2026 face the delicate task of balancing competitive pricing with adequate loss cost coverage in an increasingly uncertain operating environment.
About the Insurance Information Institute
Since 1960, the Insurance Information Institute (Triple-I) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate, and connect consumers, industry professionals, policymakers, and the media. An affiliate of The Institutes, Triple-I represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers, and reinsurers – serving regional, national, and global markets.
About The Institutes
The Institutes® are a global not-for-profit comprising diverse affiliates that educate, elevate and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes’ nearly 20 affiliated business units, people and organizations are empowered to help those in need with a focus on understanding, predicting and preventing losses to create a more resilient world.
The Institutes is a registered trademark of The Institutes. All rights reserved.
About Milliman
Milliman leverages deep expertise, actuarial rigor, and advanced technology to developsolutions for a world at risk. We help clients in the public and private sectors navigate urgent, complex challenges—from extreme weather and market volatility to financial insecurity and rising health costs—so they can meet their business, financial, and social objectives. Our solutions encompass insurance, financial services, healthcare, life sciences, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit www.milliman.com.
