Fitch Ratings expects the US property and casualty insurance market to continue softening through 2026 as competition intensifies, capital remains plentiful, and pricing pressure builds. Revenue growth is set to slow as rate momentum fades against a backdrop of macro uncertainty.
Even so, improved personal lines results and continued strength in commercial lines are expected to support stable earnings and underwriting profitability.
Fitch holds a neutral fundamental outlook for the US P&C insurance sector next year, while assigning a deteriorating outlook to global reinsurance.
Statutory performance across the P&C sector benefited in 2025 from a mild hurricane season and elevated reserve releases.
Global insured natural catastrophe losses totaled $108 bn, down from $147 bn in 2024 and below the five-year average of $125 bn.
Losses aligned closely with the 10-year average of $107 bn, according to Munich Re’s NatCatSERVICE data.
The costliest insured event of the year was the Los Angeles wildfires, which produced $40 bn in insured losses and $53 bn in total economic damage, making it the largest wildfire loss event in US history.
By contrast, the Atlantic hurricane season proved unusually quiet. None of the five hurricanes formed in 2025 made US landfall, the first such outcome since 2015.
Commercial lines carriers were largely insulated from California wildfire losses, which fell mainly on regional and mutual insurers.
Individual events failed to breach most excess-of-loss reinsurance layers, reflecting reinsurers’ continued retreat from high-frequency risks.
Fitch estimates the US commercial lines sector will post a combined ratio of about 94% for 2025. Underwriting profit is expected to narrow modestly in 2026, with combined ratios drifting toward 96% to 97% as catastrophe losses normalize.
- Homeowners insurance continues to benefit from prior rate increases and tighter policy terms, which have supported underwriting results.
- In private passenger auto, Fitch expects rate increases to persist into 2026, though at a slower pace than in recent years.
Reinsurance pricing softened materially at the January 2026 renewals, extending declines seen at midyear 2025. Risk-adjusted prices fell across most property catastrophe lines.
US and European loss-affected business saw rate declines of as much as 5%. For US property catastrophe loss-free accounts, pricing dropped up to 20%, compared with a range of down 10% to up 10% a year earlier.
European property pricing for loss-free business also declined by as much as 20%, versus a range of down 15% to up 5% in 2025.
Fitch expects softer conditions to persist into the April 2026 Asia-focused renewals and the June and July Florida renewals.
Capacity growth and competitive pressure are likely to drive gradual price erosion and looser terms in property reinsurance, absent significant loss activity.
Pricing discipline remains intact, however, with loss ratios still benefiting from favorable frequency trends.
Catastrophe risk remains the primary source of volatility for P&C insurers. The sector holds sufficient capital to absorb a major single-event loss, such as a severe hurricane.
Fitch cautions that a cluster of large losses over a short period would strain capital positions and could trigger rating pressure.
Fitch’s deteriorating outlook for global reinsurance reflects expectations of weakening operating and business conditions through 2026, even as capitalization remains strong.
Competitive pricing, easing terms, and rising exposure complexity are expected to weigh on reinsurer fundamentals despite the sector’s current financial resilience.
