OLDWICK – DECEMBER 01, 2025 09:29 AM (EST) AM Best is holding its market segment outlook on the U.S. personal lines segment at stable, citing in part aggressive rate increases and portfolio management measures that have led to meaningful improvement in overall underwriting performance.
According to the Best’s Market Segment Report, “Market Segment Outlook: U.S. Personal Lines Insurance,” carriers in the segment remain focused on protecting solid levels of risk-adjusted capitalization, working to achieve consistently profitable results and also maintain sufficient levels of liquidity. These positive elements are being offset by persistently high loss cost severity, which is being fueled by inflation and rising medical costs. Additional headwinds include the continuation of frequent severe weather activity, uncertainty surrounding economic conditions, including the potential impact of tariffs, and increasing levels of market competition.
“Inflation created a new norm to which rates needed to be aligned, with the elevated loss severity unfavorably impacting performance as rates caught up,” said Chris Draghi, director, AM Best. “In addition, the combination of economic inflation, social inflation and rising medical/casualty costs, has had a meaningful impact on insurers’ loss reserve positions.”
AM Best’s outlook for this segment also cites a recognition by industry regulators of the need for rate increases amid macro-economic trends. While regulatory bodies have been more accommodative than in the past, it still has taken time for rate requests to be implemented, and also requires additional time for higher rates to earn through, enabling insurers to achieve the financial benefit.
Pricing has been at the forefront of many carriers’ strategic initiatives as the operating environment changed considerably post-pandemic, necessitating a price reset for many. Diverging from previous tendencies of taking a gradual approach to rates in favor of protecting retention, insurers became more aggressive, leading to the largest annual increases of direct premiums written (on a percent basis) in 2023 and 2024 over the last 10-year period, according to the report.
“Premiums began to increase meaningfully in 2022 and have continued to climb since,” Draghi said. “The pace appears to have slowed in 2025, particularly on the personal auto side, with negative rate filings surfacing in parts of the country.”
AM Best notes that this market segment outlook takes into account the impact of current trends on companies operating in this segment over the next 12 months, and how companies manage these factors and trends. The stable outlook for the personal lines segment indicates that AM Best expects market trends to have a neutral impact on companies operating in the segment, but it does not mean that all of these companies will also have a stable outlook.
To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=360431.
A video discussion of this report is available at http://www.ambest.com/v.asp?v=ambuspl1225.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. Reprinted with permission.
