A recent report from AM Best shows that the number of upgrades in the U.S. property and casualty insurance industry will exceed the number of downgrades in 2025 for the first time in several years, driven by commercial lines.
AM Best noted that both upgrades and downgrades declined in 2025, while positive ratings increased nearly 10% year-over-year, reflecting an overall sense of stability in the property and casualty insurance industry.
Of all AM Best rating actions for the year, downgrades fell to 4.1%, with a total of 30 downgrades, compared with approximately 5.9% in 2024, with 43 downgrades. Upgrades in rating actions also fell slightly, at 4.7%, with 35 upgrades, compared with 5.8% of rating actions in the previous year, with 42 upgrades.
AM Best reports that operational performance drives the majority of upgrades and downgrades. Personal line operators accounted for the majority of downgrades, while business operators accounted for the majority of upgrades.
Definitely the most common rating action across all segments, increasing from 77.7% (566) in 2024 to 83.9% (619) in 2025.
The number of ratings under review has been halved compared to 2024, from 44 to 23, due to lower M&A activity and reduced disaster impacts.
AM Best made 31 initial ratings in 2025, accounting for 4.2% of rating actions, compared with 33 last year, the majority of which were in the commercial lines sector.
The total number of rating actions increases from 728 in 2024 to 738 in 2025.
“Insurers across the industry continue to be impacted by inflation and rising reinsurance costs. Individual insurers, especially homeowners insurers, must also contend with catastrophe losses, which although not through 2024, remain high, as well as more severe secondary risks, with higher reinsurance costs and add-on points adding to the burden. At the same time, commercial insurers are well positioned to weather headwinds such as economic and social inflation by continuing to report solid underwriting performance and reserve development, as well as positive pricing momentum and underwriting discipline,” AM Best said.
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