While moderate softening in U.S. property catastrophe reinsurance rates has been observed throughout 2025, rating agency AM Best projects that further stabilisation or minor price shifts will take place at the upcoming January renewals.
“The US homeowners market improved its resilience amid elevated catastrophe losses reported throughout 2025. Premium growth remains robust, albeit the pace has slowed compared to the prior year, driven by rate activity and expanded coverage demands,” the agency explained.
“Reinsurance market conditions continue to play a pivotal role, reflecting moderate softening of property rates, while terms and conditions remained consistent. The demand for coverage remains strong due to heightened weather loss activity and general economic and political uncertainty.”
As mentioned, property catastrophe reinsurance rates are expected to experience a “minor” decline at the 1/1 2026 renewal season, according to AM Best.
“January 2026 renewals are expected to see further stabilization or minor price shifts, though less comparative relief is expected for primary carriers operating in catastrophe-prone states,” commented Maurice Thomas, senior financial analyst, AM Best.
Adding: “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.”
Nonetheless, the current pricing trends in the catastrophe bond market may suggest that rates for higher-layer catastrophe reinsurance could experience a more significant decline than the slight decrease projected by AM Best.
It’s also important to highlight that a number of US homeowner’s insurers have returned to the catastrophe bond market this year to secure longer-term reinsurance from capital markets, likely motivated in part by the robust execution that’s being observed.
It’s worth highlighting the attractive pricing of reinsurance coverage from the capital markets through catastrophe bonds, as this does imply higher-layer property cat renewals could face more than minor pressure on rates at the renewals.
Furthermore, Thomas noted that better performers within the homeowners’ insurance space have maintained 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,” Thomas explained.
Concurrently, AM Best also observed that Q3 2025 provided a notable respite for the segment, with the quarter being exceptionally quiet for natural catastrophe activity.
This relief followed an intense first half of the year for the segment, which was primarily dominated by the January 2025 California wildfires and severe tornado outbreaks through the summer.
While other noteworthy events included severe floods across Central Texas and Milwaukee.
The agency noted that profitability for the segment will likely benefit should storm activity remain benign throughout the remainder of 2025.
To conclude, AM Best said: “Overall, the US homeowners segment continues to show signs of stabilization owing to solid (albeit moderating) premium growth, as well as refined underwriting practices amid improved property reinsurance market dynamics. However, carriers continue to face market challenges, including elevated frequency and severity of extreme weather events (specifically secondary perils) and inflationary pressures. Technology advancements will continue to transform the market landscape while regulatory changes remain a key consideration.”
