US property & casualty (P&C) premium growth and profitability are moderating as the market enters 2026, following an exceptionally strong 2025 that marked a “cyclical peak” for underwriting performance, according to a new report from the Swiss Re Institute.
“We estimate US P&C industry ROE reached 15% in 2025, driven by exceptional underwriting results and still-rising investment income. The industry’s 89% combined ratio in Q3 2025 was the lowest quarterly result since at least 2001,” the report explained.
According to Swiss Re, underwriting outperformance in 2025 reflected solid underlying results, favourable reserve development and catastrophe losses that were broadly in line with long-term norms.
At the same time, no hurricane made US landfall for the first time in a decade, despite three Category 5 hurricanes forming in the Atlantic.
Looking ahead, Swiss Re said margins remain attractive heading into 2026, drawing incremental capacity into the sector and easing price momentum.
As a result, the firm expects growth and returns to normalise toward the cost of capital over 2026–2027.
“Our forecasts for ROE at 12% this year and 10% in 2027 reflect weaker underwriting profitability as rising competition, easing premium rates, and the impact of persistent inflation on claims push up the combined ratio,” the report noted.
At the same time, investment income is contributing marginally less support as the gap between portfolio and new-money yields has narrowed.
Together, these factors point to a normalisation of total industry returns, with ROE moderating toward the cost of capital by 2027.
With this in mind, Swiss Re said nominal premium growth should reach a trough of about 3% in 2026 and normalise to 3.5% in 2027 as the cycle moves toward balance.
“Growth decelerated strongly to around 5% in 9M 2025 after four years of roughly 10% annual premium growth between 2021 and 2024. Growth rates are converging toward the low- to mid-single digits in most personal and commercial lines,” Swiss Re added.
Personal auto is seen as a key swing factor for 2026, as strong profitability in 2025 is already translating into rate reductions that could weigh on industry-wide growth. Property premiums are also expected to continue easing, partly offset by incremental demand linked to data centre expansion.
Swiss Re’s new report also forecasted a 97% combined ratio in 2026 and 99% in 2027, after a 94% estimate for 2025.
The firm concluded, “We expect underwriting results to deteriorate, from this high base, in 2026 as strong profitability generates retained earnings and strengthens insurers’ appetite to deploy capital, intensifying rate competition. The pace and breadth of pricing erosion will be a key determinant of industry growth and profitability through the next phase of the cycle.”
