Fitch Ratings assigns a neutral outlook to the U.S. property and casualty insurance sector for 2026, covering both commercial and personal lines. Beinsure analyzed the report and highlighted the key points.
The view rests on expectations that strong statutory performance in 2025 carries forward, helped by a quiet hurricane season, unusually large favorable reserve development, and robust personal auto results.
Those tailwinds did a lot of the work. The U.S. P&C insurance sector is projected to remain profitable through 2026, driven by strong performance in private auto underwriting.
S&P Global forecasts a combined ratio of 99.2% in 2025, following a significant improvement in 2024. However, growth is expected to slow due to reduced premiums and catastrophe risk.
Key highlights
- Fitch Ratings keeps a neutral outlook on the U.S. P&C insurance sector for 2026, banking on carryover strength from 2025 but acknowledging that the easy tailwinds are fading.
- Pricing across U.S. and global P&C markets is drifting into a softer cycle, with commercial rate increases slipping into low single-digit % territory and property rates dipping for the first time since 2017.
- Reserve adequacy in long-tail casualty lines remains the biggest structural risk, as litigation abuse, large verdicts, and settlement inflation continue to push claims severity higher.
- Profitability stays intact, though less flashy. The 2025 combined ratio is expected at 94%, easing to 96-97% in 2026 as reserve releases normalise and catastrophe losses revert closer to trend.
- Capital positions remain solid, M&A activity is likely to pick up again in 2026, and ratings stability across U.S. P$C insurers remains unusually high.
Insurance pricing discipline and claims execution
The setup for 2026 looks less forgiving. Pricing discipline, reserve strength, and claims execution face pressure from tighter competition, geopolitical uncertainty, slower economic growth, and a legal environment that refuses to cool down.
Longer-tail casualty reserves remain a focal risk. Large verdicts, expanding settlements, and litigation abuse continue to push claims severity higher across commercial auto, general liability, and umbrella business. The cost curve hasn’t flattened.
Global P&C insurance pricing decline as market shifts toward softer cycles. Global insurance market drifting into a progressively softer setting, with pricing momentum slipping across most European and US P&C insurance lines.
P&C insurance sector outlook and performance snapshot
| Category | 2025 | 2026 |
| Sector outlook | Strong statutory performance | Neutral |
| Industry combined ratio | 94% | 96-97% |
| Reserve releases | $18 bn | Lower, normalised |
| Return on surplus | 10.1% | 9.1% |
| Capital position | Resilient | Stable, sufficient |
| Pricing trend | Firm, moderating | Adequate, softening |
Business conditions should feel familiar next year
Capital stays resilient. Profitability holds, though momentum fades. According to Fitch, the industry combined ratio for 2025 should improve by 3 percentage points year on year to 94%.
Insurers leaned heavily on reserve releases, roughly $18 bn through 9M25, almost double the prior-year pace. That support won’t repeat at the same scale.
For 2026, Fitch projects a combined ratio in the 96-97% range, assuming a more typical hurricane season and less favorable reserve development.
Results still depend on solid performance across personal and commercial lines, even as growth slows. Lower interest rates should weigh modestly on net investment income, but book yields remain supportive.
The adjusted industry return on surplus is estimated at 10.1% for 2025 and 9.1% for 2026.
Rate momentum remains, but the edges are softening. Property rates even dipped for the first time since 2017 thanks to more capacity and a friendlier reinsurance market.
P&C insurance pricing remains adequate
P&C insurance pricing remains adequate, even as rate increases cool, according to Fitch. Commercial P&C insurance lines pricing is moderating into the low single-digit % range, based on market surveys including the Council of Insurance Agents & Brokers Commercial Market Index. Competition hasn’t turned reckless.
Key Pressures and Supportive Factors for 2026
| Supportive factors | Pressure points |
| Strong book yields | Rising competition |
| Solid capital buffers | Slower economic growth |
| Adequate pricing | Litigation-driven severity |
| Softer reinsurance pricing | Geopolitical uncertainty |
| Diversified business mix | Long-tail reserve risk |
US commercial lines insurers turned in another solid stretch through the first three quarters of 2025, with composite combined ratios holding in the mid-90% range and operating ratios settling in the low-to-mid-80s.
Those numbers, helped by investment income on large reserve bases, delivered returns on capital near 10%. That’s a marked improvement compared with the prior three years, when volatility and reserve strain kept results from stabilising.
AM Best kept its outlook for US commercial insurance lines at “stable,” pointing to operating ratios in the low-to-mid-80% range and roughly 10% returns on capital through the 2025.
The segment should stay profitable in aggregate and sturdy enough to handle whatever comes next. That resiliency hinges on a few lines doing a lot of heavy lifting. Beinsure analyzed the report and highlighted the key points.
The Stable outlook reflects AM Best’s expectation that the US commercial lines segment will remain profitable in aggregate and will be resilient in the face of near- and longer-term challenges.
According to our data, the Stable outlook is also predicated on the fact that several sub-segments with Stable outlooks have robust margins.
P&C insurance pricing and market cycle trends
| Segment | Current trend |
| Commercial P&C | Low single-digit % rate increases |
| Personal auto | Rate growth slowed to low single digits |
| Property | Entering softening phase |
| Global P&C | Gradual shift toward softer cycle |
| Reinsurance | Buyer’s market forming in 2026 |
Personal auto insurance still shows discipline
Rate increases have slowed to low single-digit levels after a long run of double-digit hikes that ended in March 2025. Renewal premiums continue to climb in weaker segments such as commercial auto and excess and umbrella liability.
Property lines have entered a softening phase after an extended hard market, though underwriting remains profitable for now.
The United States personal auto insurance industry experienced its best underwriting result in the post-pandemic era with a net combined ratio of 95.3 in 2025.
Casualty and Litigation Exposure
| Line of business | Risk assessment |
| Commercial auto | High severity pressure |
| General liability | Litigation-driven loss inflation |
| Umbrella & excess | Large verdict exposure |
| Long-tail casualty | Reserve adequacy concern |
| Cyber & specialty | Elevated volatility |
Personal auto insurance underwriting profitability appears to finally be headed in a positive direction after recent years of record underwriting losses. But while these gains show improvement, it will likely take time for them to be reflected in flattening premium rate, according to Triple-I report.
Auto insurers’ net combined ratio in 2025 improved to 104.9, a 7.3-point increase from 2022.
The net written premium growth in 2024 reached 14.3%, the highest in over 15 years and 6 points higher than the previous record, due to rate increases to counter inflation-related loss costs.
These improvements follow 2022, which had the worst results in recent years. In 2020, the industry issued $14 mn in rebates and discounts to policyholders, anticipating lower losses due to reduced driving during the COVID-19 pandemic lockdown.
Insurance catastrophe losses remain a drag
Insured losses topped $100 bn through 9M 2025, even without a U.S. hurricane landfall. Secondary perils drove the damage. Wildfires and severe convective storms accounted for more than $50 bn, marking the third straight year above that threshold.
Personal property results stay volatile, no way around it. Primary insurers should benefit from softer reinsurance pricing in 2026, with ample capacity creating a buyer’s market.
Reinsurers, though, are expected to hold firm on terms, conditions, and attachment points.
Catastrophe Loss Profile
| Metric | Value |
| Insured cat losses (9M25) | >$100 bn |
| Secondary perils | >$50 bn |
| Primary drivers | Wildfire, convective storms |
| Hurricane impact | No major U.S. landfall |
| Reinsurance outlook | Softer pricing, steady terms |
Capital adequacy and balance sheet metrics
Fitch expects 2026 metrics to remain sufficient to absorb large losses or stacked stress scenarios. The agency bases its view on its Prism model and traditional leverage measures, with net written premiums to policyholder surplus estimated at 0.8x at year-end 2025.
| Indicator | Status |
| Net written premium to surplus | 0.8x |
| Stress absorption capacity | Sufficient |
| Large-loss tolerance | High |
| Reserve leverage | Moderating |
| Rating stability | Very strong |
According to our data, that leaves limited pressure on balance sheets.
M&A activity should pick up again in 2026
M&A activity should pick up again in 2026 as rates ease and insurers look to deploy excess capital or rebalance portfolios.
Some moves already point the way. Everest Group agreed to sell renewal rights for its global primary retail business to American International Group.
The Travelers Companies Inc. exited its Canadian personal insurance business and most of its Canadian commercial book. Portfolio reshaping is back on the agenda.
Strategic Activity and Industry Structure
| Area | Direction |
| M&A activity | Expected to rise in 2026 |
| Capital deployment | Increasing |
| Portfolio reshaping | Active |
| Line exits | Selective |
| Ratings outlooks | 97% Stable, none Negative |
M&A deals in insurance sector
PwC has disclosed that the insurance sector recorded $31.8 bn in M&A deals across 207 transactions between June 1 and November 30, and expects deal activity in 2026 to be broadly in line with this year.
Deal flow has remained steady over the past 12 months, as strong buyer appetite, driven by consistent inorganic growth strategies, has been met by a steady stream of sellers entering the market.
Notably, in the past 6M 2025 alone, seven insurance megadeals exceeding $1 bn have been announced.
The $31.8 bn figure across 207 transactions for the period compares to $30 bn and 209 disclosed deals for the prior six months.
Looking ahead to H1 2026, PwC has suggested that carriers are likely to continue focusing on capital optimisation and portfolio reshaping through M&A transactions.
The firm explained that P&C M&A activity is picking up, as many carriers have reported improved loss ratios and record underwriting profitability, making the sector more attractive to investors and strategic buyers.
Ratings stability remains high
Fitch says 97% of its rated U.S. P&C insurance portfolio carries Stable Outlooks. No rated insurers sit on Negative Outlook. Performance dispersion will continue, but most carriers should operate within rating tolerances over the next year.
FAQ
Fitch expects strong statutory performance from 2025 to carry into 2026, supported by resilient capital, still-adequate pricing, and profitable underwriting across both commercial and personal lines. The outlook turns neutral, not positive, because competition is rising and reserve support is easing.
A benign U.S. hurricane season, unusually large favorable reserve development, and strong personal auto performance did much of the heavy lifting. Insurers released about $18 bn of reserves through 2025, almost twice the prior-year level.
The environment tightens. Pricing discipline, reserve strength, and claims management face pressure from slower economic growth, geopolitical uncertainty, and a legal system that continues to drive claims severity higher, especially in long-tail casualty lines.
Yes, according to Fitch. Pricing remains adequate even as rate momentum cools. Commercial P/C rate increases have moderated into the low single-digit % range, based on surveys including the Council of Insurance Agents & Brokers Commercial Market Index.
Longer-tail casualty lines stand out. Commercial auto, general liability, and umbrella coverage remain exposed to litigation abuse, large jury awards, and rising settlements. Reserve adequacy in these lines remains a central concern.
Insured catastrophe losses exceeded $100 bn through 2025, driven largely by secondary perils such as wildfire and severe convective storms. Personal property results remain volatile, though softer reinsurance pricing in 2026 should help primary insurers absorb shocks.
Capital adequacy metrics should stay stable in 2026, with net written premiums to policyholder surplus near 0.8x. Fitch says 97% of rated U.S. P/C insurers carry Stable Outlooks, with none on Negative. M&A activity is expected to rise as insurers deploy excess capital and reshape portfolios, a trend already visible in recent transactions.
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Edited by Nataly Kramer — Lead Insurance Editor at Beinsure
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.