AM Best forecasts continued positive momentum for the U.S. property and casualty sector in 2025

The U.S. property and casualty (P&C) insurance sector experienced notable improvement in 2024 compared to 2023, with this positive momentum expected to carry into 2025, according to a new AM Best report. Higher interest rates are supporting stronger investment returns for insurers, helping to offset the financial impact of severe weather-related losses.

In 2023, the industry posted a $24.6 billion underwriting loss, balanced by $72.4 billion in net investment income. Underwriting losses eased in 2024, while investment income climbed to an estimated $85.4 billion and is forecast to reach $100.8 billion in 2025.

Commercial lines underwriting in 2024 benefited from rate increases across most sectors, while personal lines improved due to pricing adjustments, better claims management, and stronger risk selection.

For 2025, AM Best projects a 7.3% rise in net premiums written, following an estimated 10% increase in 2024. Personal lines premiums are expected to have grown by 12.9% in 2024, with a projected 9% rise in 2025.

Insurers are increasingly focused on securing necessary rate increases, particularly in personal auto and homeowners insurance, according to Greg Williams, managing director at AM Best.

However, challenges persist. Jacqalene Lentz, AM Best senior director, noted that worsening weather-related disasters, coupled with growing dependence on reinsurance, are creating complexities as some reinsurers reassess their appetite for catastrophe-exposed risks.

Additionally, social inflation, litigation funding, and broader economic pressures have continued to push up claims costs in commercial lines throughout 2024. These factors could weaken the adequacy of prior-year loss reserves, especially in casualty lines, Lentz added.