With premium growth slowing to around 3 or 4 percent, and hurricane activity likely returning to normal levels, analysts at Fitch Ratings foresee 2026 underwriting results for property/casualty insurers lining up with results for 2024.

Tana Marcom and Chris Grimes, both senior directors at the rating agency, offered the forecasts during a North American Property/Casualty Credit Outlook webinar for 2026 yesterday, also noting that lower levels of favorable prior-year loss development factored into their projections.

Marcom noted that the U.S. P/C sector has reported “historically strong” results so far, and Fitch Ratings expects the full-year 2025 combined ratio to land at around 94—”the best result in over 15 years.” The 94 combined ratio is also roughly 3 points lower than 2024’s overall industry combined ratio by Fitch’s calculations.

Besides the lack of landfalling hurricanes, $18 billion of favorable loss reserve development was reported through the third quarter of this year, a figure that Marcom said was nearly double the level reported in 2024.

“The sector enters 2026 on solid footing with underwriting profitability expected to persist, although profits will be slightly lower than 2025,” she said going on to indicate Fitch’s forecast that the overall combined ratio will return to the 2024 level, climbing back to the 96-97 range next year.

Breaking the results and forecasts apart for personal and commercial lines, Grimes and Marcom said that both sectors will likely report combined ratios of about 94 for 2025. For commercial lines, the result marks the fifth consecutive year of underwriting profitability, Grimes reported.

“We do expect underwriting profits to narrow modestly in 2026 with a combined ratio between 96 and 97” for commercial lines next year, he said.

Giving some highlights of the personal lines story, Marcom said that a 94 combined ratio through nine months was 6 points lower than 2024, and that an 84 personal lines combined ratio recorded for third-quarter 2025 was 15 points below last year’s personal lines combined ratio in the same quarter.

Related article: Best Quarter in a Quarter Century: S&P GMI U.S. P/C Q3 Analysis

Strong private passenger auto insurance results blended with lower catastrophe losses to produce the favorable comparisons, she said. In particular, she highlighted 30 consecutive quarters of double-digit rate increases for private passenger auto insurance that fueled tremendous improvement in bottom-line results over the past two years.

Looking ahead, she said that while loss severity has gone up—”and could creep up more due to tariffs,” private passenger auto loss frequency trends have benefited from improved safety features in cars.

As for homeowners, in spite of the absence of hurricane losses, the California wildfires added $40 billion to incurred losses and severe convective storms added another $50 billion. “Despite this, ample property/ casualty reinsurance capacity is making it a buyers’ market, and primary insurers will benefit from softening rates there in 2026,” she said, looking ahead to next year. In addition, even though hurricane losses are likely to return next year, rate hikes and underwriting actions should continue to positively impact profitability for homeowners insurers in 2026, she said.

Slower Growth and M&A

Asked to home in on premium growth next year, Marcom shared Fitch’s 3-4 percent expectation across all lines, noting that net written premium growth though nine months in 2025 was just about 5 percent. That’s down from 9 percent and 10 percent for the same period in 2024 and 2023.

“That’s reflective of the lower private passenger auto rates and continued softening, particularly in the property line of business,” she said, explaining the downward direction of the reported and expected growth rates.

During her earlier commentary on personal auto insurance, she noted that in light of the significantly improved profitability in the line, “we are now seeing carriers pivot towards improving their retention and growing their new business with increased advertising spending and more modest rate increases in the low-single digit range.”

“Overall, we believe that competition remains rational and disciplined,” she added.

Fitch also considers the state of the economy in coming up with a premium growth forecast. “Should the economy slow or there’s weakened labor markets, those would also negatively impact commercial lines top line growth,” Marcom said.

As of now, overall commercial lines pricing has moderated to the low-single digit percentage range, “but we believe that rates remain adequate overall despite increasing pressure on certain lines,” she said, calling out large account and E&S property as the pressured areas. Other commercial lines “are beginning to see pricing declines stabilize,” she said referring to workers compensation and cyber financial and professional lines, including D&O.

“We expect further improvement in those rates in 2026,” she reported, while also noting the rates will likely continue rising in the commercial sectors most underperforming lines—commercial auto and excess and umbrella liability.

Asked how reinsurance pricing might impact go-forward margins in casualty lines, Marcom reported that reinsurers are continuing to “get rate” for casualty coverage. In addition, primary insurers are still pushing rate in lines exposed to social inflation.

“On the primary side, we are seeing, particularly in those lines that are most exposed to social inflation. The primary hikes, she suggested, could potentially offset any increases in casualty reinsurance pricing.

Grimes addressed a question of why an overall reinsurance buyers’ market is developing.

“A lot of that had to do with the pretty significant market correction that happened in the property-catastrophe space coming out of 2023,” he said, referring to both a steep “step change” in pricing and changes in the attachment levels that happened two years ago. While the overall reinsurance pricing environment “remains very strong,” Grimes said that market is likely to reacting to the “very strong margins” that reinsurers have been posting since then.

“I think buyers have an opportunity, given that there’s been so much capacity for property-catastrophe [reinsurance] to acquire new reinsurance towers in 2026 at a price somewhat less than what we’d seen given the very strong results in ’24 and ’25.” Putting a number on it, Grimes said the general market sentiment puts overall risk-adjusted rates down 5-10 percent during Jan. 1 renewals.

Overall, Fitch maintains a neutral outlook for the North American P/C insurance sector, which means that overall operating and business conditions are expected to remain mostly unchanged from the prior year.

Commenting on the industry’s strong capital position, Grimes said that policyholders surplus soared 24 percent over the last three years to $1.2 trillion as of Sept. 30, 2025. Fitch expects insurance capital to grow another 5 percent next year, he said, noting that the strong capital provides a cushion of any macro shocks that could materialize.

Of note, he said that an equity market correction would hamper capital growth for the industry.

The webinar took place against a backdrop of swirling rumors about a potential M&A deal between two of the industry’s largest commercial insurers – Chubb and AIG. While the Fitch analysts did not address that news directly, Marcom did note that M&A activity has picked up, and that Fitch expects that to continue next year. She reasoned that carriers are looking to deploy excess capital and they are searching for other avenues of growth during a softening rate environment, and that they are also looking for ways to improve diversification.

“No blockbuster deals have been announced yet, but several notable transactions have occurred as companies refocus their operations and as Asian insurers seek international growth to offset slower growth in their domestic market.”

Among the recent deals she highlighted were AIG’s announcement that it would acquire the renewal rights to Everest’s global primary retail business, Nationwide’s announcement that it will acquire Markel’s reinsurance renewal rights, and Sompo’s announcement about the acquisition of Aspen Bermuda. She also mentioned that Mitsui Sumitomo has acquired a stake in W.R. Berkley.

Last week, W.R. Berkley disclosed that representatives of the Japanese P/C insurance carrier had informed W.R Berkley that it has acquired beneficial ownership of at least 12.5 percent of W.R. Berkley’s outstanding common stock pursuant to previously announced agreements.