The U.S. property and casualty insurance sector looks set to grow faster than the wider economy in 2025, with underwriting profit projected for the second year in a row, according to the latest Insurance Economics and Underwriting Projections from the Insurance Information Institute (Triple-I) and Milliman.
Analysts pointed to steady premium growth, controlled replacement costs, and resilient economic conditions as the key drivers. Still, the outlook carries caveats.
Triple-I’s chief economist Michel Léonard said 2025 performance has exceeded expectations, but cautioned that tariffs, inflation, and a weakening labor market could weigh heavily on 2026 results.
“Even though the tariffs’ impact is less severe than feared, the question is whether it’s been avoided or just delayed into next year,” Léonard said.
He added that premium volumes continue to benefit from stronger-than-expected underlying growth while replacement costs remain below headline inflation.
The industry returned to underwriting profitability in 2024 for the first time since 2020. That profitability should hold in 2025, though margins will likely be thinner.
Key briefing takeaways:
- GDP growth forecast: 1.6% in 2025, under the Fed’s target.
- P/C growth: 2.4%, outpacing GDP.
- Replacement costs: rising from 1.4% in 2024 to 2.2% in 2025, still under overall inflation.
- Interest rates: cuts expected to ease mortgage rates with housing starts picking up in 2026–27.
- Homeowners: net combined ratio (NCR) improved, but still unprofitable.
- Personal auto: NCR slightly better, with continued profitability expected.
- General liability: remains the laggard, forecast NCR of 107.1 in 2025.
Patrick Schmid, chief insurance officer at Triple-I, said favorable Q2 homeowners’ results helped offset the losses from the Los Angeles fires earlier in the year. He expects personal lines to grow faster than commercial lines in 2025, though both should converge by 2027.
Milliman actuary Jason Kurtz pointed out that general liability remains the most difficult line. “We expect slight improvement through 2026–2027, but ratios will stay above 100,” he said.
Forecast NCR of 107.1 signals ongoing underwriting losses, despite forecasted premium growth of 8% in 2025 as insurers respond with pricing adjustments.
One bright spot remains workers’ compensation. Preliminary NCCI numbers show 2025 combined ratios in the 85–93 range. If confirmed, it would mark 12 straight years under 100, continuing the line’s position as the strongest performer in the P/C market.
The headline story is clear: profitability is back in U.S. P&C, but fragile. With economic uncertainty still circling, analysts say 2026 will be the year that tests whether this momentum is structural or just a temporary reprieve.
