U.S. property and casualty insurance: Strong underwriting in 1H25 Breadcrumb Navigation Fitch Ratings US P&C The U.S. property and casualty insurance industry achieved strong underwriting results in 2Q15, with a statutory combined ratio of 96.4%, and is on track to be profitable through year‑end, with lighter 2Q CAT activity, stronger prior‑period reserve releases offsetting 1Q events, personal auto surging ahead while homeowners remain soft, and despite waning pricing momentum and ongoing tariff‑linked cost risks, full‑year combined ratio projections are expected to remain below 100%, absent outsized second‑half CATs, according to the new Fitch Ratings report, U.S. Property/Casualty Insurance.
Fitch Ratings US P&C : US P&C insurers stay profitable in 2025
According to Fitch Ratings, a company that offers credit ratings, analysis, and research, the US property and casualty (P&C) insurance market had very good underwriting results in the first half of 2025 and is predicted to keep making money until the end of the year.
According to Fitch, the industry’s statutory combined ratio was 96.4% for the first six months, up 1.2 points from the same time in 2024.
While overall price progress is favourable, it remains modest, with competitive pressures in the car market and the possible effect of tariffs posing challenges to long-term development.
Fitch expects the industry’s combined ratio for the whole year to grow slightly compared to 97% in 2024 but stay below 100%, ensuring profitability despite anticipated headwinds from hurricane activity, wildfires, and inflationary impacts from trade measures.
Fitch said that disaster losses were between $75 billion and $92 billion in the first half of the year, owing mostly to the Palisades and Eaton fires in January, as well as a succession of severe weather events.
Furthermore, segment-level dynamics are mixed: personal auto continues to drive the improvement off of previous rate actions as well as physical damage severity that is trending more favorable, while homeowners’ results continue to be challenged by elevated 1Q catastrophe activity and ongoing nat‑cat volatility, with further rate action warranted in many states. Commercial lines remain modestly soft overall, with commercial auto showing improvement while workers’ compensation and other liability face headwinds from litigation trends and loss cost inflation, capping further gains despite investment income and reserve releases supporting earnings quality.
Fitch maintains a Neutral Sector Outlook New; Profits Should Still Be Present in 2H25 Despite Slowing Pricing Momentum and Possible Macro Spillovers from Trade; Full‑Year Combined Ratio Likely to Remain Sub‑100, Absent Outsized 2H CATs.
However, the second quarter witnessed relatively few disaster occurrences, while good prior-period reserve building of 2.8% of earned premiums, compared to 1.8% last year, helped offset earlier losses.
In terms of line-specific performance, Fitch observed that the total direct loss ratio remained rather steady, with personal lines improving somewhat and commercial lines deteriorating slightly.
Commercial auto’s combined ratio improved by 4.6 points, while commercial multi-peril saw a little increase. Workers’ compensation and other liabilities, on the other hand, have seen some softening.
Homeowners’ insurance was under strain, with the direct loss ratio rising to 79.8%, roughly 11 points more than a year ago, owing to first-quarter disaster occurrences. Fitch also said that rate hikes are ongoing in most states to address natural disaster volatility.
Personal vehicle insurance was one of the strongest categories, with Fitch reporting a 6.3-point drop in the direct loss ratio to 66.9%, the highest result in five years. This was mostly due to improved physical damage coverage, as well as the advantages of previous rate increases and underwriting measures.
Fitch noted, however, that additional meaningful improvement is doubtful, given slowing rate action and the risk that tariffs could exacerbate cost severity.
According to Fitch, homeowners’ ongoing substantial rate hikes drove 6.7% rise in personal lines direct written premiums during the first half of the year, while premium growth for autos moderated. business auto and liability lines were the most rapidly expanding areas of business insurance, but the overall premium growth slowed to 4.3% from 5.3% the previous year. Workers’ compensation premiums fell again, and commercial multi-peril growth stalled.
Additionally, operational income increased by 18% year-over-year, and the annualised operating return on surplus improved to 7.9% from 7.2%, according to Fitch. The revenue from investments rose by 3.1%. Adjusted for Berkshire Hathaway’s sale of Apple shares in 2024, net income climbed by 25.7%. The policyholder surplus increased by 4.9% when compared to the end of 2024, thanks to higher statutory earnings and investment profits that were not yet realised.
In its forecast, Fitch kept a neutral view on the US non-life insurance market, noting predictions for ongoing underwriting profitability in 2025. The agency indicated that although the combined ratio would likely nudge higher than in the preceding year, it will remain positive.
Pricing momentum is decreasing generally, however performance differs across various lines, suggesting that profitability will be positive but slightly lower than 2024.
Looking forward, capital strength and investment income should continue to support results even as underwriting margins compress, with new‑money yields higher as a buffer against volatility given the absence of a severe catastrophe season and moderating price firmness in a number of lines.
Personal lines “Frequency trends remain favorable within personal lines; however, a rebound in parts and labor inflation or tariff‑related import costs could re‑accelerate severity, while in commercial lines, litigation trends and social inflation continue to be a drag on long‑tail liabilities, despite the improving results in auto,” the company said.
Carrier strategies should continue to focus on underwriting discipline, laser-sharp risk-selection in cat-exposed property, and tighter terms and conditions, over selective rate moves where loss-cost trends support, bolstering a sub-100 combined ratio for full-year absent large second-half events.
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