2026 P&C Outlook: Premium Growth Slows as Market Moves Toward Balance

• By: Olivia Overman
• January 26, 2026

After a peak in underwriting profitability in 2025, the U.S. property & casualty insurance industry is expected to enter a softening market in 2026, “as rising competition, easing premium rates and the impact of persistent inflation on claims push up the combined ratio,” according to Swiss Re’s latest U.S. P&C Outlook.

While premium growth decelerated to 4% in the third quarter of 2025 from 9% at prior year-to-date, the industry delivered a combined ratio of 89% in 2025, the lowest quarterly result since at least 2001, the report said.

“It just doesn’t get any better than this,” S&P noted.

Decreasing premium growth follows an exceptionally strong 2025, which saw lower catastrophe losses and rising investment income. Growth decelerated to around 5% in the third quarter of 2025, after four years of roughly 10% annual premium growth between 2021 and 2024. During the third quarter, growth rates converged toward the low- to mid-single digits in most personal and commercial lines, according to the report.

Looking ahead, overall premium growth is expected to slow to 3% in 2026 and 3.5% in 2027 as the market moves toward balance. Further, return on equity (ROE) is expected to decline to 12% in 2026, from a projected 15% for 2025, which is driven by exceptional underwriting results and still-rising investment income.

A further decline in ROE to 10% is projected in 2027, reflecting weaker underwriting profitability. Investment income is also providing marginally less support, as the gap between portfolio and new-money yields narrows.

For 2026, personal auto is a key swing factor as strong profitability in 2025 is translating into rate reductions and could weigh further on industry-wide growth. As of January 2026, Swiss Re calculated a flat trailing 12-month rate increase of 0%, down from 7% a year ago.

Personal auto’s 2025 net combined ratio is forecast at 94.4 points, an improvement from 2024, while net written premium growth is expected to have slowed to 3.6%, the lowest level since 2020, according to “P/C Economics and Underwriting Projections: A Forward View,” a report from the Insurance Information Institute (Triple-I) and Milliman.

Yet, rate deceleration coincides with persistent claims inflation: in November 2025, used car prices were up 4% year over year while motor vehicle repair prices were up 10%, implying a considerably weaker combined ratio in 2026, Swiss Re said.

Property premiums are also expected to continue easing, though this may be slightly offset by incremental demand linked to data center expansion.

However, general liability and commercial auto are two major lines forecast to remain above a net combined ratio of 100 points, though gradual improvements are expected for both lines in 2026 and 2027, according to Triple-I.

Meanwhile, workers compensation continues to perform strongly, with a projected combined ratio between the high 80s to the low 90s through 2027.

Nevertheless, these figures are strong by historical standards. The “normalization of total industry returns” reflects a shift following four years of elevated gains driven by commercial and personal lines. Margins remain at levels considered attractive, though the gap between current returns and long-term averages is expected to narrow over the next two years.

“We’re on track to achieve the lowest net combined ratio in over a decade, thanks in part to a hurricane season that spared the U.S. and strong homeowners performance, even after the Los Angeles fires in Q1 2025,” said Patrick Schmid, chief insurance officer at Triple-I. “Growth in personal lines premiums remains solid, and the narrowing gap between personal and commercial lines performance points to a cautiously optimistic outlook for the industry.”

Olivia Overman is IA content editor.

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