Potential growth in the U.S. property and casualty (P&C) insurance industry is expected to fall to -3.7% in the first half of 2026, down from 1.6% in 2025, as insurers continue to contend with catastrophe risks, inflationary pressures and rising claims costs, according to new forecasts from the Insurance Information Institute (Triple-I) and actuarial and consulting firm Milliman.
In their latest briefing, Property and Casualty Economics and Underwriting Forecasts: A Forward-Looking Perspective, Triple-I and Milliman said they expect a recovery in 2027 and 2028, although insurers may still face pressure from economic uncertainty and rising losses in the coming years.
The organizations also forecast replacement costs to increase by 2.1% in the first half of 2026, the same as 2025 levels. Although replacement cost inflation has slowed from its peak in 2022, Triple-I and Milliman expect costs to accelerate again in 2028 and eventually rise faster than overall U.S. inflation.
Despite a more difficult outlook for 2026, the industry still recorded stronger underwriting results in 2025. Triple-I and Milliman reported the industry’s net combined ratio (NCR) fell to its lowest level in more than a decade, reflecting improved conditions across several major lines after years of severe catastrophe losses, inflation-driven claims inflation and post-pandemic market dislocation.
“The industry’s performance in 2025 should be viewed against the backdrop of the significant financial pressures that insurers have faced in recent years,” commented Dr Michel Léonard, CBE, Chief Economist and Data Scientist at Triple-I. “While conditions have stabilized somewhat, insurers continue to operate in an environment of heightened catastrophe risk, higher claims severity and ongoing economic uncertainty.”
Triple-I also pointed to broader economic conditions affecting the industry. “Real GDP growth slowed to 2.0% in the first quarter, while consumer price index inflation remained high at 3.3% in March, still above the Fed’s long-term target,” Léonard added. “Insurance employment fell 1.8% year-on-year in March, an underperformance that reflects continued weakness in industry employment conditions. At the same time, rising energy prices and persistent inflationary pressures continue to weigh on household and business finances.”
Data from Triple-I and Milliman show that personal auto insurance will continue to recover in 2025, with NCR increasing by 3.5 percentage points year-on-year to 91.8. Although underwriting conditions are expected to remain favorable into 2026, net written premium growth slowed to 4.0%, the lowest level since 2021.
The organizations also reported improvements in homeowners insurance performance despite continued disaster activity, including the Los Angeles wildfires earlier this year. Supported by easing replacement cost pressures and early pricing action, the 2025 Homeowner NCR reached 88.1, marking the strongest underwriting performance in more than a decade.
Triple-I and Milliman said profitability pressure remains concentrated in several business areas. General liability and commercial motor are expected to remain the only major lines above 100 NCR through 2026, but are expected to gradually improve over the next few years.
Both divisions continue to face significant challenges related to litigation and the severity of claims, said Jason B. Kurtz, FCAS, MAAA, principal and consulting actuary at Milliman.
“Litigation pressure and claims severity trends continue to drive higher loss costs, limiting improvements in these areas despite broader industry strength,” Kurtz said.
Workers’ compensation is expected to remain one of the strongest performing lines from 2026 to 2028, with Triple-I and Milliman expecting the combined ratio to be around 90, indicating continued good underwriting profitability.
“Replacement costs are down significantly from their 2022 peak, but our forecast shows that replacement costs will reaccelerate through 2028 and eventually exceed the overall U.S. inflation rate,” said Dr. Patrick Schmid, chief insurance officer at Triple-I.
“While underwriting conditions have strengthened for some property lines, the industry faces a challenging road ahead due to increased catastrophic risk, economic uncertainty and continued claims cost pressures.”
Separate data from NCCI also point to continued pressure on underwriting costs. “The preliminary reported 2025 combined ratio is 91, an increase of approximately 5 percentage points from the prior year,” added NCCI Chief Actuary Donna Glenn. “This change is primarily due to increases in loss and underwriting expense ratios.”
