Credit rating agency AM Best has revised the outlook for the US homeowners insurance segment to stable from negative, citing moderating premium growth and enhanced catastrophe risk management practices amid improved property reinsurance market dynamics.
AM Best stated that the revision reflects several positive trends that are helping carriers navigate a challenging environment. These include improved capitalisation, rate adequacy, coverage modifications, and reinsurance stabilisation.
The demand for homeowners’ coverage remains strong due to heightened claim activity attributable to extreme weather and general economic and political uncertainty.
Additionally, premium growth remains strong, though the pace has slowed compared to the previous year, with increases stemming from rate activity and a greater need for expanded coverage.
The report highlights that technology adoption has become a “norm” across the segment, allowing for more precise underwriting.
Insurers are leveraging artificial intelligence (AI) and machine learning to analyse data for pricing accuracy and cost reduction. Carriers are also using satellite and aerial imagery to assess property risks and roof damage in real-time.
Furthermore, the integration of smart home devices for monitoring leaked and smoke is generating data that supports usage-based premiums and discounts, the report noted.
Maurice Thomas, senior financial analyst, AM Best, commented: “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.”
Despite the improved outlook, AM best warns of counterbalancing factors that continue to pressure the industry.
These include: secondary perils, which are rising in severity and impacting performance; severe weather, 1H25 was dominated by severe events but Q3 provided a “notable respite” as it was quiet; economic uncertainty, inflationary pressures remain and there is uncertainty regarding the potential impact of tariffs on loss cost; and regulatory challenges in key states and market consolidations.
The report notes that the reinsurance market conditions continue to play a pivotal role in the segment’s recovery. Moderate softening has been observed in property catastrophe reinsurance rates in 2025, a trend that is expected to continue.
Thomas said: “January 2026 renewals are expected to see further stabilisation or minor price shifts, though less comparative relief is expected for primary carriers operating in catastrophe-prone states.
“Overall, the improving reinsurance dynamics in 2025 helped to alleviate pressures in the homeowners’ segment, fostering its resilience. Nevertheless, the segment remains inherently exposed to the effects of weather-related operating volatility.
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