Rising Costs, Slowing Premiums: Why AM Best Predicts a Tougher 2026 for the P/C Insurance Market

After a relatively strong 2025 for the property/casualty insurance sector, AM Best is signaling a shift. According to new analysis reported by Insurance Journal, the industry may be facing a more challenging 2026 driven by slowing premium growth, inflationary pressure, and rising claims costs.

Premium Growth Slows as Rates Plateau

The momentum seen in 2025—supported by strong investment income and previous rate hikes—is starting to cool. AM Best’s latest industry report forecasts slowing net premium growth across many lines in 2026. This softening trend is expected to push the industry’s combined ratio up by 1.9 points to 96.9.

From cyber to D&O to commercial property, renewal pricing softened throughout 2025—and the trend appears likely to continue. Even workers’ compensation, traditionally a stable performer, saw its premium growth moderate last year.

Inflation Hits Claims Costs Hard

Jacqalene Lentz, Senior Director at AM Best, notes that rising prices for construction materials, auto parts, and commercial repair costs are pushing loss ratios higher. These macroeconomic pressures are cutting into the cushion insurers regained in 2025.

Even personal lines—which benefited from rate approvals and tech‑driven underwriting improvements—may feel pressure again in 2026. Higher auto fatality rates and increasing repair costs remain persistent challenges.

Commercial Lines Feel the Strain

Commercial lines are projected to reach a combined ratio of 96.3 in 2026—slightly worse than 2025’s 95.8. Auto, medical professional liability, and products liability each recorded combined ratios over 100 in 2025, indicating underwriting losses and ongoing stress.

Reserves: A Persistent Risk

AM Best’s re‑estimation of ultimate reserves revealed a $9 billion deficiency for year‑end 2024. While improved from earlier projections, reserve adequacy remains a major concern—and one of the clearest indicators of long‑term company solvency.

E&S Market Continues to Shine

As admitted carriers tightened underwriting or stepped away from volatile classes such as property and high‑hazard liability, the excess & surplus (E&S) market absorbed the overflow. AM Best calls this shift one of the defining forces of 2025—a trend expected to influence 2026 as well.

What This Means for Insurance Professionals

Whether you’re licensed or exploring a path into the industry, these shifts highlight the importance of staying skilled, informed, and adaptable. A year of flatter rate changes and rising claims severity means professionals will need sharper analysis, stronger risk‑evaluation skills, and a deep understanding of evolving market pressures.

If you’re considering entering or advancing within the insurance field, Cameron Academy provides flexible, career‑focused licensing programs designed to help professionals stay ahead of market changes and elevate their expertise.

To dive deeper into the original reporting, visit the full article on Insurance Journal.