TRIPLE-I/MILLIMAN: US P/C INSURANCE INDUSTRY NAVIGATES RECOVERY FOLLOWING YEARS OF ELEVATED CLAIMS COSTS AND ECONOMIC DISRUPTION

States News Service

The following information was released by the Insurance Information Institute:

Personal and Commercial Property Lines Benefit from Moderating Inflationary Pressures

May 14, 2026

MALVERN, Pa., May 15, 2026 The U.S. property/casualty (P/C) insurance industry showed improving underwriting conditions in 2025 following several years of elevated catastrophe losses, inflation-driven claims costs, and post-pandemic economic volatility. The industry's net combined ratio (NCR) reached its lowest level in more than a decade, reflecting improved underwriting conditions across many major lines. These findings are detailed in P/C Economics and Underwriting Projections: A Forward View, a members-only briefing from the Insurance Information Institute (Triple-I) and Milliman.

"The industry's 2025 results should be viewed in the context of the significant financial strain insurers have faced in recent years," said Michel Leonard, Ph.D., CBE, chief economist and data scientist at the Triple-I. "Although conditions have stabilized somewhat, insurers continue to operate in an environment marked by elevated catastrophe risk, higher claims severity and ongoing economic uncertainty."

"Real GDP growth slowed to 2.0% in the first quarter, while Consumer Price Index inflation remained elevated at 3.3% in March, remaining above the Federal Reserve's long-term target," Leonard said. "Insurance employment declined 1.8% year-over-year in March, underperforming the broader labor market and reflecting continued weakness in sector employment conditions. Meanwhile, higher energy prices and persistent inflationary pressures continue to strain household and business finances."

Key Highlights

Underlying P/C growth for the first half of 2026 is forecast at -3.7%, down from 1.6% in 2025, with recovery expected in 2027 and 2028.

Replacement cost growth is projected at 2.1% for the first half of 2026, flat with 2025 levels, reflecting moderating claims severity pressures. Replacement costs are expected to converge in 2027 and to exceed broader U.S. inflation by 2028, reinforcing the need for continued pricing discipline across P/C lines.

Personal auto continued to improve in 2025, with an NCR of 91.8, improving 3.5 points from 2024. Net written premium growth slowed to 4.0%, the lowest since 2021, while underwriting conditions are expected to remain favorable.

Homeowners underwriting improved despite continued catastrophe activity, including the Los Angeles fires in the first quarter. The 2025 NCR was 88.1, the lowest in more than a decade, as replacement-cost pressures eased in 2025 and prior pricing actions helped offset catastrophe losses.

Underwriting conditions improved broadly across major lines, particularly in property-related areas, though profitability pressures remain elevated in several commercial segments.

"Replacement costs moderated significantly from their 2022 peak, but our forecasts show them re-accelerating through 2028 and eventually outpacing overall U.S. inflation," said Patrick Schmid, Ph.D., chief insurance officer at Triple-I. "While underwriting conditions have strengthened in some property lines, the industry faces a challenging road ahead with elevated catastrophe exposure, economic uncertainty and persistent claims-cost pressures."

General liability and commercial auto remain the only major lines above a 100 NCR, though gradual improvement is expected through 20262028.

Jason B. Kurtz, FCAS, MAAA, principal and consulting actuary at Milliman, noted that general liability and commercial auto continue to face significant profitability challenges.

"Litigation pressures and claims severity trends continue to result in elevated loss costs, constraining improvement in these segments despite broader industry strength," Kurtz said.

Workers' compensation continues to perform strongly, with net combined ratios projected in the low 90s through 20262028, reflecting sustained underwriting profitability across the line.

"The preliminary reported combined ratio for calendar year 2025 is 91, an increase of about 5 points from the prior year," said Donna Glenn, chief actuary at NCCI. "The change is primarily due to an increase in the loss and underwriting expense ratios," she added. Read NCCI's full State of the Line Report for more information.

About the Insurance Information Institute

Since 1960, the Insurance Information Institute (Triple-I) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate, and connect consumers, industry professionals, policymakers, and the media. An affiliate of The Institutes, Triple-I represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers, and reinsurers serving regional, national, and global markets.

About The Institutes

The Institutes are a not-for-profit comprised of diverse affiliates that educate, elevate, and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes 20 affiliated business units and backed by more than 115 years of experience as a trusted knowledge partner, we empower people and organizations to help those in need with a focus on understanding, predicting, and preventing losses to create a more resilient world. Learn more at Global.TheInstitutes.org.

About Milliman

Milliman leverages deep expertise, actuarial rigor, and advanced technology to develop solutions for a world at risk. We help clients in the public and private sectors navigate urgent, complex challengesfrom extreme weather and market volatility to financial insecurity and rising health costsso they can meet their business, financial, and social objectives. Our solutions encompass insurance, financial services, healthcare, life sciences, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe.