Homeowners Insurance Rebounds With $16.5 Billion Underwriting Profit

• By: AnneMarie McPherson Spears
• September 30, 2026

The U.S. homeowners insurance segment staged a dramatic recovery in 2025, swinging from a $1.3 billion net underwriting loss in 2024 to a $16.5 billion gain, according to a new AM Best market segment report. The result marked the homeowners market’s first underwriting profit since 2019.

Profitability improved to its strongest level in more than a decade. The net combined ratio hit 87.8 in 2025 from 99.2 in 2024 and 110.9 in 2023, while the net loss and loss adjustment expense ratio dropped to 61.1. Both measures were the lowest recorded during the 2015-2025 period AM Best reviewed.

The turnaround comes despite the more than $35 billion in underwriting losses the homeowners market experienced during the five years immediately preceding 2025.

AM Best attributed the recovery to stronger premium adequacy, more sophisticated use of data and modeling, better risk selection and a relatively benign catastrophe year. Although California wildfires, tornadoes and severe convective storms produced heavy losses early in 2025, no hurricanes made U.S. landfall.

Carriers also continued to refine underwriting guidelines, claims handling and loss-control practices, helping the segment absorb the year’s catastrophe activity.

Those gains followed a sizable rebuilding of the segment’s premium base. Direct and net premiums written increased by double digits in each year from 2022 through 2024 as carriers pursued rate adequacy to counter inflation, higher construction costs and repeated catastrophe losses.

The market improvements in Florida, the nation’s second-largest homeowners market, also contributed to 2025’s positive results. Tort reforms enacted in 2022 and 2023 reduced incentives for property-related litigation by eliminating one-way attorney fees and restricting assignment of benefits to contractors. The resulting decline in property-related lawsuits led insurers to lower reserves on property claims in the state, AM Best said.

Favorable prior-year reserve development provided an additional lift. The combined homeowners and farmowners multiperil line benefited by almost $4.1 billion in 2025, improving the calendar-year combined ratio by 2.5 points. AM Best noted that reserve releases of this scale are unusual for homeowners insurance, a short-tail line in which claims generally settle relatively quickly.

However, California’s homeowners market is not yet out of the woods, with a direct combined ratio that jumped to 205.3 as insurers contended with the year’s opening wildfires. Missouri also remained unprofitable at 131.5 after record catastrophe activity, including more than 100 reported tornadoes and five presidential disaster declarations between May and July.

Independent insurance agents and their customers are experiencing easing—but not disappearing—pricing pressure. The average approved homeowners rate increase nationwide declined to 7.6% in 2025 from 13.5% in 2024, then slowed to 4.3% in the first half of 2026. Property catastrophe reinsurance pricing has also softened from its 2023 peak, giving primary insurers room to moderate increases and, in some markets, expand coverage. Through midyear 2026, the industry’s direct incurred loss ratio was 48.4, its lowest first-half reading in five years.

Despite the recovery, AM Best cautioned that the market remains exposed to climate, demographic and construction trends. Population continues to shift toward catastrophe-prone states: Texas, Florida, North Carolina, South Carolina and Arizona, which accounted for 58% of U.S. population growth from 2020 through 2025. More people and property in areas vulnerable to hurricanes, wildfires and severe convective storms could drive insured losses higher.

“Increasingly volatile climatic conditions and changing demographic and construction exposures could increase the volatility of homeowners insurance in the medium term,” the report said. “Risk management initiatives such as concentration management, reinsurance utilization, capital modeling and optimization along with underwriting and pricing will determine the industry’s results.”

AnneMarie McPherson Spears is IA news editor.