AM Best said in a recent report that despite a tumultuous start to 2025, marked by devastating California wildfires and multiple severe convective storms, the U.S. property and casualty (P&C) insurance industry successfully recovered in the third quarter, driven by continued momentum in personal lines that successfully offset first-quarter losses.
Direct loss rates for the industry’s two largest sectors – homeowners/farmers and private passenger vehicles – improved year over year as of the end of September, the report said.
AM Best pointed out that as of the third quarter of 2025, the property and casualty insurance industry’s net underwriting revenue has surged, increasing from $3.7 billion in the same period in 2024 to approximately $35 billion.
AM Best Industry Research Analyst Helen Andersen said: “Direct premium increases for homeowner/farmer and private passenger vehicle coverage were smaller through the third quarter of 2025 compared with the double-digit growth seen during the same period in 2024. However, continued premium growth reflects carriers still pushing rate adequacy where they believe it is needed.”
The report also notes that general liability loss ratio results for the first three quarters of 2025 differ significantly from the same period in 2024.
Specifically, the direct loss rate of other liability (occurrence) items improved by 2.1 percentage points, while the loss rate of other liability (claims) items worsened by 4 percentage points.
Although workers’ compensation direct loss rates worsened from the prior year, carriers that underwrite this coverage maintained healthy underwriting profits.
However, those margins have narrowed significantly, raising concerns about how long premium declines can continue before underwriting performance deteriorates significantly.
Overall, the real estate/industrial direct loss rate improved significantly in the first nine months of 2025, continuing the positive trend from the previous year, with the direct loss rate in the first nine months of 2024 improving by 5.2 percentage points compared to 2023.
David Blades, associate director of industry research and analysis at AM Best, said: “The relatively mild 2025 Atlantic hurricane season played a significant role in the performance of the property/casualty industry in the nine months of 2025, and these results provide optimism for the full year’s direct and net overall results.
“Improving industry direct loss ratios also demonstrate effective underwriting, pricing, claims and loss control measures by personal lines insurers that stem from more effective enterprise risk management practices.”
