The US property and casualty insurance market is entering a period of moderation in 2026 following a cyclical peak in underwriting profitability last year, according to new analysis from Swiss Re Institute.
The reinsurer's newly released US Property & Casualty Outlook projects premium growth will slow to 3% in 2026 and 3.5% in 2027. Return on equity is expected to decline to 12% in 2026 and 10% in 2027 as the sector moves closer to cost-of-capital levels.
Swiss Re noted that the industry recorded an 89% combined ratio in the third quarter of 2025, marking the strongest quarterly result in decades. That performance, combined with solid underwriting gains throughout the year, drew additional capacity into the market.
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The strength of underwriting results in 2025 extended beyond a single quarter. AM Best reported that the US P&C industry posted a US$34.9 billion net underwriting gain for the first nine months of the year, compared with a US$3.7 billion gain during the same period in 2024.
The industry's combined ratio for that nine-month stretch improved to 94.0, supported by muted catastrophe losses and 7% growth in net premiums earned. Policyholder surplus rose 6.8% from year-end 2024 to reach US$1.2 trillion.
Read more: Underwriting rebound lifts US P&C operating income nearly 52%
The influx of new capital has begun to ease pricing momentum across several lines. Market data through the third quarter of 2025 showed premium growth had already decelerated to 4%, down from 9% during the same period the prior year.
According to Swiss Re, the slowdown reflects a return to more typical market conditions after four consecutive years of elevated gains. Both commercial and personal lines contributed to that earlier growth cycle.
Swiss Re also pointed to modest gains in investment income as a contributing factor. Portfolio yields are forecast to rise to 4.0% in 2026 and 4.1% in 2027, driven by reinvestment into higher-yielding securities.
Personal auto is expected to be a key variable in the 2026 outlook. Strong profitability in that segment during 2025 has begun translating into rate reductions, which could affect overall industry results.
The Swiss Re report characterized the current environment as a "return to norm" for the US P&C sector. Margins remain at levels considered attractive, though the gap between current returns and long-term averages is expected to narrow over the next two years.
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