The US homeowners insurance segment posted a $16.5 billion underwriting gain in 2025, reversing course and avoiding an annual loss for the first time in six years, according to a new AM Best market segment report.
The rating agency attributed the turnaround to enhanced pricing sophistication, improved catastrophe risk management and more consistent application of disciplined underwriting guidelines, combined with a relatively benign catastrophe year.
David Blades, associate director at AM Best, said insurers have fundamentally changed how they approach rate adequacy.
"Insurers have consistently pushed for higher rates to address their calculated rate level needs, and overall, homeowners' insurers are doing a much better job of matching rate to risk, with greater dependence on recent loss trends than historical loss trends," Blades said.
Double-digit growth in both direct and net premiums written in each year from 2022 through 2024 built a stronger premium base that, when combined with a calmer catastrophe year in 2025, significantly improved the segment's underwriting profitability ratio.
Insurers also invested in more precise data analytics and modeling to sharpen risk selection, alongside improvements in claim handling, loss control and operational efficiency.
Maurice Thomas, senior financial analyst at AM Best, said those investments are showing up in the results.
"Homeowners insurers have put resources into improving their underwriting, claim handling, loss control, and overall efficiency to produce improved bottom-line results," Thomas said.
The report also pointed to Florida's 2022-23 tort reforms as a contributing factor, noting that the state's loss and loss adjustment expense ratios dropped well below the national average in 2025 and were the lowest of any of the top 10 states by a significant margin.
The improving environment is also visible in rate filing activity. The average approved homeowners rate increase across the US was 7.6% in 2025, down sharply from 13.5% in 2024.
Through the first half of 2026 that figure dropped further to 4.3%, reflecting both improved aggregate results and stabilization in the reinsurance market. Filings for rate increases slowed during the second half of 2025 and that trend has continued into 2026.
The US property and casualty industry's direct incurred loss ratio for homeowners in the first half of 2026 came in at 48.4, its lowest point in five years, suggesting the favorable conditions that drove 2025's results have carried into the current year.
The improving environment is also reflected in carriers' willingness to resume writing new business in California, a market that had seen significant withdrawal and non-renewal activity in recent years.
For agents and brokers, the combination of slowing rate increases, stabilizing reinsurance costs and returning carrier appetite in previously restricted markets like California represents a meaningful shift in market conditions from the past several years.
Clients who faced non-renewals, significant premium increases or restricted coverage options may find more competitive alternatives available now than at any point since the hard market began in earnest.
Brokers should treat the current environment as a prompt to proactively review existing clients' coverage, pricing and carrier options rather than assuming renewals will simply reprice at prior terms, since the improving market creates real opportunities to demonstrate value through active placement management.
