U.S. property and casualty (P&C) premium growth and profitability are slowing as the market enters 2026, following an unusually strong 2025 that marked a “cyclical peak” in underwriting performance, according to a new report from Swiss Re Research Institute.
“We expect the U.S. property and casualty insurance industry’s ROE to reach 15% in 2025, driven by superior underwriting performance and continued growth in investment income. The industry’s combined ratio in the third quarter of 2025 was 89%, the lowest quarterly performance since at least 2001,” the report explains.
Swiss Re said the underwriting outperformance in 2025 reflected solid underlying performance, favorable reserve development and catastrophe losses broadly in line with long-term normal levels.
Meanwhile, for the first time in a decade, no hurricane made landfall in the United States, despite three Category 5 hurricanes forming in the Atlantic.
Looking ahead, Swiss Re said margins remained attractive heading into 2026, attracting incremental capacity from the industry and moderating price increases.
As a result, the company expects growth and returns to normalize toward the cost of capital in 2026-2027.
“Our forecasts for ROE this year and 2027 ROE of 12% and 10%, respectively, reflect lower underwriting profitability as increased competition, lower premium rates and the impact of ongoing inflation on claims push up the combined ratio,” the report states.
At the same time, investment income provided slightly less support as the gap between portfolio yields and new currency yields narrowed.
Together, these factors suggest that total industry returns will normalize, with ROE moving toward the cost of capital by 2027.
With this in mind, Swiss Re said that as the cycle moves towards equilibrium, nominal premium growth should trough around 3% in 2026 and normalize to 3.5% in 2027.
Swiss Re added: “Premiums will grow at around 10% annually between 2021 and 2024, before decelerating sharply to around 5% four years later in 2025. Growth rates for most personal and commercial lines are moving towards low to mid-single digits.”
Personal Automotive is seen as a key mover in 2026 as strong profitability in 2025 has translated into lower interest rates that could weigh on overall industry growth. Real estate premiums are also expected to continue to decline, partially offset by incremental demand related to data center expansions.
Swiss Re’s new report also forecasts a combined ratio of 97% in 2026 and 99% in 2027, compared with a 2025 forecast of 94%.
The company concluded: “We expect underwriting performance to deteriorate from this high base through 2026, as strong profitability generates retained earnings and increases insurers’ willingness to deploy capital, thereby intensifying rate competition. The speed and breadth of pricing erosion will be a key determinant of industry growth and profitability in the next stage of the cycle.”
