US property and casualty insurers posted stronger profitability in the first half of 2025, according to Moody’s Ratings, despite a heavy burden of wildfire-related catastrophe claims in California.
A representative group of 20 rated insurers delivered $27bn net income, up 13% from the first half of 2024.
Moody’s said gains came from personal auto recovery and robust investment income, which outweighed a sharp increase in catastrophe costs.
Those catastrophe losses reached $16.1bn, 35% higher than last year’s level and the largest first-half tally the group has seen in years. Wildfires drove most of the Q1 losses, though catastrophe activity eased in the second quarter.
Reserve releases in personal auto and workers’ comp added further support to results.
Reinsurers absorbed a substantial share of wildfire costs. Moody’s noted that US and Bermuda reinsurers posted an average 96.1% combined ratio, compared with 87.3% a year earlier.
Even with the uptick in loss ratios, reinsurers still achieved solid equity returns thanks to rising investment income.
Looking ahead, Moody’s flagged the remainder of the 2025 North Atlantic hurricane season as critical for full-year outcomes. By early September, six named storms had formed, none hitting the US.
Fitch Ratings says the US property and casualty sector turned in a strong first half of 2025, with underwriting results showing resilience despite heavy catastrophe losses.
The industry’s statutory combined ratio landed at 96.4%, an improvement of 1.2 points from the same period in 2024.
Catastrophe costs were severe, ranging from $75bn to $92bn in the first six months, largely tied to the Palisades and Eaton fires and a wave of damaging storms early in the year.
Losses eased in the second quarter, while favorable reserve development equivalent to 2.8% of earned premiums—up from 1.8% the year before—helped absorb the impact.
The severity of hurricanes will also play into January 2026 reinsurance renewals.
Homeowners lines were hit hardest by wildfires. A sample of five insurers increased homeowners premiums 12% in H1 2025, driven by rate hikes and growing exposures.
Their combined ratio climbed to 108.0%, up from 105.4%, with catastrophe costs the main driver. Stripping out those events, Moody’s said underlying homeowners profitability actually improved.
Personal auto results continued their rebound. Seven insurers grew premiums by 10% through rate hikes and higher policy counts. The combined ratio dropped to 85.5% from 88.6%, reflecting lower claim frequencies and earned rate increases that offset higher severities.
Commercial insurance also stayed profitable, with a combined ratio of 93.1%, slightly above last year’s 90.5%.
Moody’s said some commercial carriers absorbed wildfire losses via their personal lines exposure.
Pricing trends reflected mixed conditions. Marsh data cited by Moody’s showed casualty pricing still rising, while property pricing declined into mid-2025.
Reinsurance buyers now expect property reinsurance rates to soften further in 2026, while casualty rates look stable to firming.
Moody’s concluded that US P&C insurers remain strongly capitalized. Aggregate shareholders’ equity for the group climbed to $337bn as of June 30, 2025, up 8% since year-end 2024.
The gains came from higher retained earnings and shrinking unrealized investment losses. With maturing bonds being reinvested at higher yields, insurers should continue to see income tailwinds through the rest of the year.
