AM Best reports a shift in the US property and casualty sector, where rating upgrades exceeded downgrades in 2025 for the first time in several years, with commercial lines carriers driving most of the positive movement.
The change lands against a backdrop where overall rating activity tightened, yet signals across the market point to steadier footing than recent cycles suggested.
Both upgrades and downgrades declined during the year, though affirmations climbed by nearly 10% year over year, which indicates a broader sense of stability across the segment rather than rapid improvement or deterioration.
According to Beinsure analysts, this pattern often reflects markets adjusting to prior shocks rather than reacting to new stress events.
Downgrades dropped to 4.1% of rating actions, totalling 30, compared with 5.9% and 43 cases in 2024.
Upgrades also edged lower, reaching 4.7% with 35 actions, down from 5.8% and 42 the year before, so the balance shifted even as activity slowed on both sides.
Affirmations dominated rating outcomes, rising to 83.9% with 619 actions, up from 77.7% and 566 in 2024, which reinforces the sense that most carriers held their positions rather than moving sharply in either direction.
The total number of rating actions increased slightly to 738 from 728, so volume didn’t drop off despite fewer directional changes.
Operating performance drove most rating decisions, with a clear divide between segments.
Personal lines carriers accounted for the bulk of downgrades, while commercial lines insurers made up most upgrades, reflecting differences in pricing strength, claims trends, and exposure to catastrophe losses.
The number of ratings placed Under Review fell sharply to 23 from 44, tied to lower merger and acquisition activity and fewer large-scale catastrophe impacts feeding into rating uncertainty.
Initial ratings came in at 31, slightly below 33 in 2024, with most new entries concentrated in commercial lines.
AM Best points to ongoing pressure from inflation and rising reinsurance costs across the sector, with personal lines carriers, especially those focused on homeowners’ coverage, absorbing continued losses from catastrophe events and secondary perils.
Reinsurance pricing and higher attachment points add further strain, pushing margins tighter even as headline loss activity moderates.
Commercial lines carriers, on the other hand, continue to post steady underwriting results, supported by pricing momentum and disciplined risk selection, which helps offset economic and social inflation pressures.
That divergence between segments keeps shaping rating outcomes, and it doesn’t look like it’s closing anytime soon.
Property and casualty insurance lines reflect that tension. Tort reform in several states has brought stability, yet social inflation keeps pushing liability claim costs above general economic inflation. US P&C insurance returns peak in 2025 as growth slows into 2026.
Third-party litigation funding injects additional capital into plaintiff strategies. The combined effect drives higher severity and increased volatility.
When surveyed at the conference, 83% of participants said elevated legal severity and volatility now represent a structural feature of the insurance market. Only 17% described it as temporary.
According to Beinsure analysts, the consensus points toward recalibrated pricing and reserving assumptions rather than expectations of reversal.
