Stable for Now, but with Risks on the Horizon
Despite a complex operating environment, the U.S. P&C sector remains highly rated and well-capitalized, says a new report from S&P Global Ratings.
The newly released U.S. Property/Casualty Insurance Sector View 2026, authored by Neil Stein, Managing Director and Sector Lead for North America P/C Insurance Ratings, uses the title—”Resilience in the Face of Uncertainty”— encapsulating the central theme of stability, noting that 85% of rated P/C insurers carry stable outlooks, with 23% holding ‘AA’ ratings and 72% holding ‘A’ ratings. The median rating for U.S. P/C insurers is ‘A+,’ and 95% of rated insurers have capital redundancy at the 99.95% confidence level or higher under S&P’s capital model.
Underwriting Performance and Premium Growth
On underwriting, S&P forecasts a combined ratio of 96%–98% for 2026–2027, a meaningful improvement over the 99.9% run rate from 2020–2024. The first nine months of 2025 came in at 93.9%, helped significantly by no hurricane making U.S. landfall and the absence of major severe convective storms during that period. Premium growth is projected at 5%–6%, though S&P notes this could slow if the economy underperforms expectations.
Personal lines insurers are approaching rate adequacy after years of compounding rate increases and are shifting focus toward policy growth. Private auto’s combined ratio improved dramatically to 95.3% in 2024 from 109.9% in 2023, while homeowners improved to 99.7% from 111%. Commercial lines performance remains generally favorable, though commercial auto and other liability continue to be outliers, with combined ratios exceeding 100% in most of the past ten years, driven largely by social inflation.
Risks on the Horizon
The report flags several forward-looking risks. U.S. insured catastrophe losses surpassed $100 billion in 2025 for the second consecutive year—notably without a single hurricane landfall. The Los Angeles wildfire was the costliest insured wildfire loss on record. Social inflation, driven by rising litigation costs and larger jury awards, continues to pressure casualty reserves, with $8.6 billion in adverse development across other liability lines and $3.8 billion in commercial auto in 2024 alone. S&P also highlights potential macroeconomic uncertainty from tariffs, geopolitical risks, evolving regulation, and the challenge of demonstrating return on investment from growing AI and technology spending.
Capital Deployment and M&A
On capital deployment, S&P expects M&A activity to accelerate in 2026, noting growing private equity interest and continued expansion into Lloyd’s syndicates. Share repurchases and special dividends may increase given higher-than-usual excess capital levels.
S&P Global Ratings is a division of S&P Global (NYSE: SPGI) that publishes credit ratings, research, and risk analysis. The company states that its ratings and analyses are made available on its websites at www.spglobal.com/ratings.
The full report is available free of charge on the S&P Global website.
