Insurers of U.S. homes have improved rate adequacy and catastrophe risk management, modified coverage, and benefitted from a softening reinsurance market to earn a change in AM Best’s outlook for the segment to stable from negative.
A quiet hurricane season did not hurt either.
A new report from the industry rating agency said demand for homeowners insurance coverage is strong and the segment “remained resilient” as it grew premiums to address inflationary pressures and macroeconomic influences. Insurers continue to seek rate increases, AM Best said.
Related: Homeowners Insurers Still Boosting Rates; Top Carriers Ranked: AM Best
January 2026 reinsurance renewals are expected to stable, with some minor price shifts. Reinsurance price softening in 2025 allowed insurers to moderate rate increases.
In addition, carriers have used technology to improve underwriting. “[Artificial intelligence] and machine learning models have been used to analyze data for pricing accuracy, underwriting, and cost reduction,” AM Best said, furthermore noting the use of satellite and aerial imagery, home smart devices, drones, and advanced modeling.
AM Best said insurers have continued with a trend of higher deductibles, refined sub-limits and exposure mitigation to improve results.
The rating agency said it continues to have a watchful eye on the impact of tariffs, with the potential to increase construction and repair costs. However, “No meaningful impact from tariffs has been reported,” it said.
“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,” said Maurice Thomas, senior financial analyst, AM Best.
Some volatility and market pressures has led to what AM Best called a “greater interest in merger and acquisition activity, particularly regarding those companies that were materially distressed.” Consolidation remains a “key consideration for segment participants.”