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 insuran
ce coverage is strong and the segment “remained resilient” as it grew premiums to address inflationary pre
ssures 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. R
einsurance 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 sma
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rt 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 p
otential to increase construction and repair costs. However, “No meaningful impact from ta
riffs has been reported,” it said.
“Better performers with
in the homeowners’ insurance space maintain solid risk-adjusted capitalization with suffic
ient liquidity. However, the capital cushion has eroded for some carriers in high-risk areas d
ue to material operating losses driven by severe events, most recently from the January wildfires in California and severe tornado outbr
eaks 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 compa
nies that were materially distressed.” Consolidation remains a “key consideration for segment participants.”