Foundation Firmed: AM Best Switches View of US Homeowners Insurers to Stable

Insurers of U.S. homes have improved rate adequacy and catastrophe risk management, modified coverage, and benefitted from a softening reinsurance market to earn a change in AM Best’s outlook for the segment to stable from negative.

A quiet hurricane season did not hurt either.

A new report from the industry rating agency said demand for homeowners insurance coverage is strong and the segment “remained resilient” as it grew premiums to address inflationary pressures and macroeconomic influences. Insurers continue to seek rate increases, AM Best said.

Related: Homeowners Insurers Still Boosting Rates; Top Carriers Ranked: AM Best

January 2026 reinsurance renewals are expected to stable, with some minor price shifts. Reinsurance price softening in 2025 allowed insurers to moderate rate increases.

In addition, carriers have used technology to improve underwriting. “[Artificial intelligence] and machine learning models have been used to analyze data for pricing accuracy, underwriting, and cost reduction,” AM Best said, furthermore noting the use of satellite and aerial imagery, home smart devices, drones, and advanced modeling.

AM Best said insurers have continued with a trend of higher deductibles, refined sub-limits and exposure mitigation to improve results.

The rating agency said it continues to have a watchful eye on the impact of tariffs, with the potential to increase construction and repair costs. However, “No meaningful impact from tariffs has been reported,” it said.

“Better performers within the homeowners’ insurance space maintain solid risk-adjusted capitalization with sufficient liquidity. However, the capital cushion has eroded for some carriers in high-risk areas due to material operating losses driven by severe events, most recently from the January wildfires in California and severe tornado outbreaks across the country in the first half of the year,” said Maurice Thomas, senior financial analyst, AM Best.

Some volatility and market pressures has led to what AM Best called a “greater interest in merger and acquisition activity, particularly regarding those companies that were materially distressed.” Consolidation remains a “key consideration for segment participants.”

AM Best’s outlook for the U.S. personal lines segment will stay stable, it added in a separate report released to start December.

Pricing is similarly the story when looking at the whole segment, as carriers took a much more aggressive approach to increases—leading to what the agency said was the largest annual increases of direct premiums written (on a percent basis) in 2023 and 2024 over the last 10-year period.

“Premiums began to increase meaningfully in 2022 and have continued to climb since,” Chris Draghi, director at AM Best, said. “The pace appears to have slowed in 2025, particularly on the personal auto side, with negative rate filings surfacing in parts of the country.”

Topics USA Carriers AM Best Homeowners