Falling reinsurance prices are helping drive a major turnaround for the US homeowners insurance market, giving carriers room to slow down rate hikes and offer more coverage after years of severe losses, according to a new AM Best report.
The US homeowners segment experienced a significant turnaround in 2025, recovering from a more than $1.3 billion net underwriting loss in 2024 to a $16.5 billion net underwriting gain.
The Best’s Market Segment Report, titled “A Myriad of Factors Lead to Markedly Improved Homeowners Results,” cited several positive drivers in this business line such as enhanced pricing sophistication, improved catastrophe risk management, and a more consistent use of disciplined underwriting guidelines.
A softening property reinsurance sector helped relieve pressure on primary insurers, allowing them to pull back from aggressive rate hikes, and in many cases file for rate decreases – observed in late 2025 and early 2026, showing improved results and a stabilising reinsurance market.
Property catastrophe reinsurance renewal pricing reached its peak in 2023, and began softening in 2024, a downward trend that persisted through the 2026 reinsurance renewals.
AM Best emphasised that the reinsurance market stabilisation has worked in tandem with several key operational market shifts.
The average approved homeowners rate increase nationwide dropped to 4.3% though the first half of 2026, down from 7.6% in 2025 and 13.5% in 2024.
Insurers also benefited from a milder catastrophe season in 2025, marked by zero hurricane landfalls, which helped offset early wildfire claims in California and midwestern storms.
That momentum carried into early 2026, with the industry logging a 48.4% first-half direct incurred loss ratio, its lowest midyear mark in five years.
Tort reform efforts that occurred in Florida during 2022 and 2023 are also cited in the report as having a beneficial impact in the improvement of homeowners’ national results.
Florida experienced a sharp decline in both its combined ratio and loss and loss adjustment expense ratio in 2025 compared to the preceding two years. These metrics plummeted significantly below the national average for the US and were substantially lower than those recorded by any other top-ten state.
Despite these improvements, AM Best believes that population migration to states that are more susceptible to weather-related catastrophes is likely to continue to be an important driver of insured losses.
Urbanisation and rising populations have become the norm in some areas and regions that are susceptible to natural perils, and those impacted by extreme weather events, including secondary peril events, can lead to rising insured loss totals.
Catastrophes, including storms and wildfires that strike densely populated US communities, have contributed to the rise in insured losses. This is especially true in areas that have become even more populated over the last 20 or so years.
As places like Texas, Florida, and the Carolinas absorb more residents, analysts stressed that disciplined reinsurance strategies, precise catastrophe modelling, and careful exposure management will remain critical to sustaining profitability.
