Best’s Market Segment Report: AM Best Revises Outlook on US Homeowners Insurance Segment to Stable From Negative

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best is revising its market segment outlook for the U.S. homeowners’ insurance segment to stable from negative, citing moderating premium growth and enhanced catastrophe risk management practices amid improved property reinsurance market dynamics.

The Best’s Market Segment Report, “Market Segment Outlook: US Homeowners,” states that despite elevated catastrophe losses in the first half of 2025, the market has remained resilient, with the third quarter providing a notable respite, being exceptionally quiet as it relates to land-falling hurricane activity. The demand for homeowners’ coverage remains strong due to heightened claim activity attributable to extreme weather and general economic and political uncertainty. Premium growth remains robust, albeit the pace has slowed compared with the prior year, driven by rate activity and expanded coverage demands.

“Better performers within the homeowners’ insurance space maintain solid risk-adjusted capitalization with sufficient liquidity. However, the capital cushion has eroded for some carriers in high-risk areas due to material operating losses driven by severe events, most recently from the January wildfires in California and severe tornado outbreaks across the country in the first half of the year,” said Maurice Thomas, senior financial analyst, AM Best.

Carriers continue to pursue rate in their efforts to achieve and maintain adequate pricing, given inflationary pressures and macroeconomic influences. Material rate increases combined with increased inflation guard factors were the key drivers in the segment’s premium growth. Carriers also have been more effective at leveraging technology to strengthen their risk selection process, as well as manage and mitigate losses.

At the same time, insurers continue to grapple with a new norm of higher homebuilding and construction costs, thereby elevating loss costs. The uncertainty surrounding tariffs also has heightened the potential for increased construction and repair costs, though to date, no meaningful impact from tariffs has been reported. Given continued volatility and lingering market pressures, there has been greater interest in merger and acquisition activity, particularly regarding those companies that are materially distressed.

According to the report, moderate softening in property catastrophe reinsurance rates has been observed in 2025. “January 2026 renewals are expected to see further stabilization or minor price shifts, though less comparative relief is expected for primary carriers operating in catastrophe-prone states,” said Thomas. “Overall, the improving reinsurance dynamics in 2025 helped to alleviate pressures in the homeowners’ segment, fostering its resilience. Nevertheless, the segment remains inherently exposed to the effects of weather-related operating volatility.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=360432.

Leading AM Best analysts will review 2026 market segment outlooks for the U.S. insurance industry’s major segments and the delegated underwriting authority enterprises (DUAE) segment in an online briefing scheduled for Tuesday, Dec. 9, 2025, at 2:00 p.m. EST. To register for the briefing, please visit “AM Best Briefing - 2026 Insurance Outlook: Risk Management Back in the Spotlight.”

To view all Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.