Insurance Sector Navigates Challenges: First Quarter Losses Offset by Second Quarter Stability and Growth

The U.S. property/casualty (P/C) insurance industry faced a turbulent start to 2025, recording a significant $6.3 billion net underwriting loss in the first quarter. This figure dramatically outpaced the $3.6 billion loss reported in the same period last year, signaling a challenging environment for insurers.

However, a new report from A.M. Best offers a glimmer of hope, revealing a substantial stabilization in the second quarter, coupled with an improved combined ratio.

According to Best's Special Report, titled “First-Half 2025 Property/Casualty: Stabilizing Results Offer Glimmer of Hope,” the industry's combined ratio saw a notable improvement, moving from 101.5% in the first quarter down to a more favorable 98.7% in the second quarter.

This shift indicates a healthier balance between premiums collected and claims paid plus expenses, reflecting more disciplined underwriting and strategic pricing adjustments across various lines of business.

Despite the initial underwriting headwinds, the industry demonstrated remarkable resilience in other key areas.

Policyholder surplus surged by 4.8% to an impressive $1.1 trillion by the end of June 2025. This growth was predominantly fueled by robust investment income, which reached $32.4 billion for the first half of 2025, a significant increase from $28.1 billion during the corresponding period last year.

Sridhar Manyem, director of industry research and analytics at A.M.

Best, commented on the findings, stating, “While the first quarter saw significant underwriting losses, largely influenced by elevated catastrophe losses and inflationary pressures, the stabilization in the second quarter is a positive sign. The improvement in the combined ratio reflects more disciplined underwriting and pricing adjustments across various lines of business.”

Catastrophe losses continued to be a major factor, reaching an estimated $18.5 billion in the first half of 2025, up from $15.2 billion in the first half of 2024.

These severe events particularly impacted personal lines, although commercial lines also grappled with increased claim severity. Nevertheless, the industry’s ability to generate strong premium growth underscores its underlying strength, with net premiums written increasing by 5.5% in the first half of 2025, signaling healthy demand for insurance products even amidst economic uncertainties.

Looking ahead, A.M.

Best emphasizes that while challenges such as persistent inflation and escalating climate-related events remain, the industry is proving its adaptability. Continued dedication to advanced risk management, technological innovation, and precise pricing strategies will be paramount for sustaining profitability and navigating the evolving landscape of the insurance market.