Fitch maintains ‘neutral’ outlook for US P&C insurance sector amid strong profitability
Fitch Ratings maintains a ‘neutral’ fundamental sector outlook for the US property/casualty (P&C) insurance sector in 2026, as well as for both commercial and personal lines.
This assessment is based on the sector’s solid starting position for the year, which is supported by strong overall statutory performance, continued favourable personal auto insurance results, a mild hurricane season, and higher reserve releases.
Fitch expects the industry combined ratio to improve by nearly three percentage points in 2025, reaching 93.7%.
The rating agency also forecasts an improvement in statutory net earnings compared to the previous year, after adjusting for unusual realised investment gains from Berkshire Hathaway.
According to the report, industry performance is likely to remain stable in 2026, achieving a slightly lower underwriting profit with a combined ratio between 96% and 97%.
This stability will be underpinned by continued strong results in both personal and commercial lines, despite challenges that may limit top-line growth, Fitch stated.
“We expect general stability across personal and commercial lines in 2026,” said Senior Director Tana Marcom. “But macro risks—including increasing competition, geopolitical uncertainty, slowing economic growth and a difficult legal environment—could pose challenges for pricing discipline, reserve adequacy, and claims management.”
While declining interest rates are anticipated to modestly pressure net investment income, book yields are likely to remain strong. Fitch projects the adjusted industry return on surplus (ROS) at 10.1% in 2025 and 9.1% in 2026.
Fitch reports that the rating outlook for US Property and Casualty (P&C) insurers is “overwhelmingly” Stable, accounting for 97% of the rated portfolio. This outlook reflects the expectation that most insurers will continue to perform within their rating sensitivities over the next year.
The percentage of Positive Outlooks decreased from 2024, a result of two issuers being upgraded in 2025 after having a Positive Outlook in the previous year. Currently, no rated P&C insurers have a Negative Outlook.
Fitch’s P&C insurer rated universe remains in the ‘A’ and ‘AA’ categories for Insurer Financial Strength ratings, with almost two-thirds of individual ratings assigned between ‘A’ and ‘AA–’. Individual rating levels remain highly stable, which Fitch expects to continue in 2026.
Negative rating actions and Outlook changes have been limited since 2024, following several personal lines carriers receiving one-notch downgrades in 2023, the rating agency noted.
Looking ahead, the report stated, market observers should observe several key themes defining the sector in 2026. US P&C’s strong continued profitability and capital strength will be tested by softening rates and the ongoing need for price adequacy.
Additionally, volatility from natural catastrophe events and the impact of litigation on reserve adequacy will remain as persistent concerns. Finally, stakeholders should anticipate a potential pickup in merger and acquisition (M&A) activity as carriers navigate this evolving landscape.
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