Losses from two major winter storms in the United States – Fern in January and Hernando in February – are expected to result in a significant decline in underwriting profits for the first quarter of 2026, but the impact will be less severe than the California wildfires of 2025, according to AM Best.
The ratings agency expects primary insurance companies to absorb much of the losses from these two events, with a less significant impact for reinsurers.
Winter Storm Hernando brought record snowfall and blizzard conditions to the northeastern US, causing widespread power outages in Massachusetts, New Jersey, Delaware, and Rhode Island.
States of emergency were declared, closing businesses and cancelling thousands of flights, with Newark Airport reporting over two feet of snow.
Hernando, combined with Winter Storm Fern’s estimated $4-7 billion in insured losses, suggests an above-average first quarter for insured losses, though less costly than the January 2025 California wildfires.
Fern impacted southern states, who were less prepared to weather winter storms, while Hernando impacted the northeastern US, where wintry conditions are more expected.
“Significantly more commercial and residential values are prevalent in the areas impacted by Hernando, which could cause a moderate impact to aggregate earnings,” analysts stated.
Noting: “As the two storms are separate and distinct events, each of these events may be contained within the primary carriers; AM Best believes reinsurers will face lesser impacts.”
Winter storms primarily affect Property/Casualty insurance lines such as homeowners, commercial property, and auto. Business interruption due to emergency closures and flight cancellations will add to the industry’s insured losses, according to the report.
State Farm has the highest market share for homeowners multi-peril in the northeastern United States, followed by auto lines. Progressive has the highest market share for auto lines; and Travelers has the highest market share in commercial multi-peril business.
AM Best stated: “Total insured losses are anticipated to be manageable for insurers and reinsurers in aggregate. As noted in our recent Review & Preview report, Rate Action and Investment Gains Drive US P/C Industry Results Despite Headwinds, P/C 2025 results are expected to be the strongest of the past decade despite the heavy first-quarter losses from the California wildfires and other weather events.”
Concluding: “While it remains to be seen how the rest of 2026 plays out in terms of catastrophe-related losses, AM Best views these two storms as earnings events for affected carriers. More effective enterprise risk management practices played a large role in the P/C industry’s resilience in 2025 and should serve the segment well in 2026.”
