Homeowners Segment Returns to Underwriting Profit
OLDWICK — The U.S. homeowners insurance segment posted a $16.5 billion underwriting gain in 2025, ending a six-year run of annual underwriting losses, according to a new AM Best report.
AM Best attributed the improvement to more sophisticated pricing, stronger catastrophe risk management, disciplined underwriting and a stronger premium base following several years of rate increases. as outlined in Best’s Market Segment Report, “A Myriad of Factors Lead to Markedly Improved Homeowners Results.”
Insurers’ focus on rate adequacy also strengthened the line’s premium base, contributing to double-digit growth in both direct and net premiums written each year from 2022 through 2024, according to the report. Combined with a relatively benign catastrophe year, the higher premium base significantly improved the segment’s underwriting profitability in 2025.
First-Half 2026 Loss Ratio Falls to Five-Year Low
Results through the first half of 2026 indicate a calmer and more favorable start to the year. The U.S. P&C industry’s direct incurred loss ratio for homeowners insurance was 48.4 during the first half of 2026, its lowest level in five years.
“Insurers have consistently pushed for higher rates to address their calculated rate level needs, and overall, homeowners’ insurers are doing a much better job of matching rate to risk, with greater dependence on recent loss trends than historical loss trends,” said David Blades, associate director, AM Best.
Rate Increases Slow as Results Improve
The report also notes that there have been other underwriting initiatives focused on taking advantage of more precise data analytics and modeling to foster better risk selection. Filings for rate increases in the homeowners’ segment slowed during the latter half of 2025; that trend continued during the first half of 2026, reflecting improvement of results in the aggregate and stabilization in the reinsurance market. The improving environment is reflected in the willingness of insurance companies being willing to resume writing new business in California.
“Homeowners insurers have put resources into improving their underwriting, claim handling, loss control, and overall efficiency to produce improved bottom-line results,” said Maurice Thomas, senior financial analyst, AM Best.
Florida Results Improve Following Tort Reforms
While the national results for this segment reflect those efforts, tort reform efforts that occurred in Florida during 2022 and 2023 are also cited in the report as having a beneficial impact. In 2025, the loss and loss adjustment expense and combined ratios in Florida dropped precipitously from each of the two years prior. For both measures, the ratios fell well below not only the total U.S. average, but also were the lowest of any of the top 10 states by a significant margin.
Average Approved Homeowners Rate Increase Falls to 4.3%
In 2025, the average approved homeowners rate increase across the United States was 7.6%, but through the first half of 2026, that dropped to 4.3%, according to the report. Both percentages pale in comparison to the average approved rate increase of 13.5% in 2024.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=369118 .
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.
