Fitch: US P/C Insurers Hold at Neutral for 2025

December 12, 2024

U.S. property/casualty insurers are positioned favorably heading into 2025, Fitch Ratings forecasted in its annual outlook report.

Citing “a strong personal lines turnaround” and “resiliency following an above average hurricane season,” Fitch holds a neutral sector outlook for U.S. P/C insurers next year.

“P/C insurers are anticipated to generate a statutory underwriting profit and modestly higher net income in 2025,” said James Auden, managing director and property/casualty sector head for Fitch Ratings’ North American insurance rating group.

“Capital strength and prudent risk management practices for the broad universe of insurers are key factors promoting operating and rating stability amid ongoing challenges in managing wider spread natural catastrophe events and exposures and claims uncertainty in casualty lines.”

Fitch also reported a neutral outlook for the commercial lines sector and a continued “improving” outlook for the personal lines sector. The personal lines sector has experienced a strong underwriting recovery after two consecutive years of substantial losses.

Overall, Fitch data shows the P/C industry combined ratio improving by over three percentage points in 2024 to 98.7, and the ratings company’s forecast also shows a modestly positive trend continuing in 2025, when that ratio is expected to hit 98%.

Related: US P/C Industry Reverses Nine-Month Underwriting Loss

“Primary insurers are looking to offset costs with higher catastrophe reinsurance attachment points while structural changes to programs will moderate the earnings protection for insurers from small to midsize catastrophe events,” Auden said.

The Fitch report said that personal auto is set to achieve a break-even or better result this year — with an underwriting profit likely for 2025. This comes after the segment’s slow reaction to pandemic-related macroeconomic changes — including supply chain and labor market shortages and higher inflation — prompted sharp claims severity increases from 2021-23, the report noted.

At the same time, homeowners insurance “will post a significantly lower underwriting loss in 2024 due to substantial price increases over the last two years,” the media release said. Fitch explained in the report that the segment “has suffered from above-average catastrophe losses with unusually high convective storm activity and pandemic related rises in contract labor and building materials costs” and faces “continued uncertainty regarding underwriting profits.”

Meanwhile, commercial lines underwriting gains will likely narrow in 2025, Fitch reported, “with underperforming segments like general liability and commercial auto set to continue generating significant rate increases.”

Fitch considered the influence of underlying fundamentals expected in 2025 on financial performance relative to results in 2024 when determining the outlooks. Sector outlooks also evaluate the capital strength of the industry and rated insurers to support obligations and withstand potential severe losses from various adverse events.

Topics USA Carriers Property Casualty

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