The nonstandard auto insurance market in 2025 certainly looks to be maintaining the momentum it gained last year, according to a new report from AM Best.
The insurance industry rating agency said U.S. private passenger nonstandard auto insurers turned in underwriting profit of $65.2 for the first half of 2025, compared with $16.6 million during the same period a year ago.
In its Market Segment Report, AM Best said rate adequacy and leveraging technology for underwriting, claims, and distribution purposes were the drivers of profit improvement.
Nonstandard auto writers posted a H1 2025 combined ratio of 96.6 compared with a H1 2024 combined ratio of 98.
“The improved combined and loss ratios suggest insurers have raised premiums enough to better offset claim costs,” said David Blades, associate director, Industry Research and Analytics, AM Best. “In the short term, more modest price increases could still be warranted to sufficiently offset auto physical damage claim costs to replace auto parts and technology in addition to liability costs associated with increased attorney involvement in claims and uncertainty surrounding tariffs.”
The magnitude of premium increases may have peaked in 2024, with hikes of 27.6% and 24.9% in the first and second quarters compared to premium increases of 10.5% and 3.8% during the same quarters in 2025.
The prices currently paid by publicly traded brokers, large regionals, and agencies backed by private equity firms remain high. They will remain high for the desirable firms. Since supply is dwindling, prices may be even higher for those that remain if they fit the profiles of today’s major buyers. Some buyers with weaker balance sheets may be forced to the sidelines if interest rates do not decrease significantly.
Optis Partners reports that “those who picked up the most were Alera Group up 100%, HighStreet Partners up 75%, and King Risk Partners at 53%.”
According to our discussions with key acquirers, M&A activity is expected to continue in 2026, though with some caveats. Here are some of their responses:
HUB added more than 50 merger partners in 2025, according to Clark Wormer, M&A director. “M&A is the foundation of our growth strategy, enabling them to help partners expand their business and unlock new opportunities,” Clark said.