Homeowners' insurance outlook stable

Jennifer Williams ; 2025-12-05 07:40:27

New data reveals what's reshaping conditions for carriers

Insurance News

By Jonalyn Cueto

Dec 01, 2025Share

AM Best has revised its market segment outlook for the United States homeowners’ insurance segment to stable from negative. The change follows moderating premium growth, enhanced catastrophe risk management practices, and improved conditions in the property reinsurance market, according to the Best’s Market Segment Report, “Market Segment Outlook: US Homeowners.”

The firm reported that the segment remained resilient despite elevated catastrophe losses in the first half of 2025. The third quarter showed a notable reduction in severe events, with a quiet period for land-falling hurricanes. Demand for homeowners’ coverage continued to increase as claim activity rose due to extreme weather patterns and broad economic and political uncertainty. Premium growth stayed robust but slowed compared with the prior year. Rate activity and expanded coverage needs were the main contributors, according to AM Best.

“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.

Rate actions remained a priority for carriers as they sought adequate pricing amid inflationary pressures and macroeconomic factors. Material rate increases and higher inflation guard factors supported premium growth. Insurers also advanced their use of technology to refine risk selection and improve loss mitigation.

The report noted that insurers continued to face higher homebuilding and construction costs, which elevated loss expenses. Tariff-related uncertainty added pressure to construction and repair costs, though no significant effects from tariffs had been reported. Ongoing volatility and market strain contributed to increased interest in merger and acquisition activity, especially for distressed companies.

Moderate softening in property catastrophe reinsurance rates appeared 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.”