Fitch Ratings maintains “neutral” on the fundamental outlook for the U.S. property/casualty (P&C) insurance industry and commercial and personal lines in 2026.
This assessment is based on the industry’s solid start to the year, which was supported by strong overall statutory performance, continued good personal motor insurance performance, a mild hurricane season and higher reserve releases.
Fitch expects the industry’s combined ratio to improve by nearly three percentage points to 93.7% in 2025.
The ratings agency also forecast statutory net profit would improve on the previous year, after adjusting for Berkshire Hathaway’s unusually realized investment gains.
The report shows that industry performance is likely to remain stable in 2026, with slightly lower underwriting profits and a combined ratio of between 96% and 97%.
Fitch said this stability will be underpinned by continued strong performance in its personal and commercial businesses, despite challenges that could limit top-line growth.
“We expect the personal and commercial business to be generally stable in 2026,” said senior director Tana Marcom. “But macro risks – including increased competition, geopolitical uncertainty, slower economic growth and a difficult legal environment – could create challenges for pricing discipline, reserve adequacy and claims management.”
While falling interest rates are expected to put modest pressure on net investment income, book yields are likely to remain strong. Fitch expects adjusted industry return on earnings (ROS) to be 10.1% in 2025 and 9.1% in 2026.
Fitch reported that the rating outlook for U.S. property and casualty (P&C) insurers is “overwhelmingly” stable, accounting for 97% of the rating portfolio. The outlook reflects expectations that most insurers will continue to perform within their rating sensitivities next year.
The percentage of positive outlooks declined from 2024 as two issuers received upgrades in 2025 after receiving positive outlooks the previous year. Currently, none of the rated property and casualty insurance companies have a negative outlook.
Fitch’s financial strength ratings for property and casualty insurance companies remain in the “A” and “AA” categories, with nearly two-thirds of individual ratings falling between “A” and “AA-“. Individual rating levels remain highly stable, and Fitch expects this to continue into 2026.
The rating agency noted that negative rating actions and outlook changes have been limited since 2024, following several personal line operators being downgraded by one notch in 2023.
Looking ahead, market observers should observe several key themes for the industry in 2026, the report noted. The strong continued profitability and capital strength of U.S. property and casualty insurance companies will be tested by soft interest rates and continued demand for price adequacy.
In addition, volatility caused by natural disaster events and the impact of litigation on reserve adequacy will remain an ongoing concern. Finally, as operators respond to this evolving landscape, stakeholders should expect a possible pickup in mergers and acquisitions (M&A) activity.
