A Decade-Low Combined Ratio for P&C Insurance: Analyzing the Drivers Behind the Results

he P&C industry closed out 2025 with a net combined ratio of 92.9%, the lowest since 2006. Additionally, 2025’s net underwriting gain of $63 billion was nearly triple the $23 billion gain in 2024 and $22 billion in 2023.¹ The driving forces behind these strong results are a combination of stricter underwriting discipline, significant rate actions in personal lines in recent years, strong investment gains, and a historically light Atlantic hurricane season.

While many lines pushed rate increases in recent years, personal auto led the way in driving profitability.² Its net written premium grew 14.4% in 2023 and 12.8% in 2024,³ helping drive approximately 7.3-point and 9.5-point decreases in the combined ratio, respectively.⁴ In commercial lines, despite an overall market softening since late 2024,⁵ workers’ compensation continues to be favorable, while liability lines remain challenging as they continue to wrestle with social inflation and increased litigation.

Property lines, especially personal property, also achieved favorable results in 2025, though these results were mainly driven by the absence of hurricanes making landfall in the United States. For reference, catastrophe losses contributed 7.7 points to the industry’s combined ratio in 2024 and 8.5 points in 2023.⁶ The Atlantic hurricane season in 2025 was the first in 10 years in which no hurricane made landfall, and there were 90% fewer hurricane-related claims than in the previous year. According to Saurabh Khemka, president of Verisk Underwriting Solutions, in an interview with Insurance Business magazine, 2025’s results were “driven more by unusually low catastrophe losses rather than a fundamental shift in industry risk.”¹

Though 2026 results for the industry will hinge on whether Mother Nature spares the year of hurricanes as she did in 2025, the strong personal auto performance emphasizes the importance of price monitoring and getting ahead of trends. Insurers who don’t continue to monitor their trends and adjust their rates accordingly will fall behind. In a Deloitte study, the authors reported that the insurers that failed to adjust their pricing sophistication for the 40% increase in personal auto physical damage severity following the COVID-19 pandemic saw at least a 10 percentage point increase in their loss ratio.⁷

Personal auto experienced a sizable uptick in number of rate filings, indicated change, and rate change taken in 2022 and 2023 (see Figure 1). The most cited reasons for the increases were:

1. Higher repair costs and longer repair times due to supply chain disruption.
2. Higher bodily injury and medical-related claim severity.
3. The normalization of accident frequency post-COVID pandemic.

The proliferation of advanced technology and use of AI is further benefiting insurers from an operational and underwriting expenses standpoint. There are several use cases of leveraging AI across P&C operations outlined in the American Academy of Actuaries’ recent issue brief.⁸ Particularly in pricing, actuaries are incorporating nonquantitative considerations such as competitive analysis and weather trends into their analyses, building tools that assist in balancing risk changes and competitive positioning while pricing renewal books, and increasing speed to filing by cutting the time spent on manual data entry and drafting objection responses.