US insurers face declining underwriting margins and rising catastrophe exposure, with projections showing returns falling from 6.6% to 3.0% under sustained loss activity and lower property rates, according to Howden Re.
Recent underwriting performance has been supported by rate increases during the hard market, but those conditions are shifting. US property insurance rates have declined by about 22% from their mid-2024 peak, with average reductions of 17% recorded in the fourth quarter of 2025.
Modeling based on recent performance shows that a reversion in the non-catastrophe combined ratio to the 2015-19 average would add 3.6 percentage points. Holding catastrophe loss loads at 2020-25 levels would contribute a further 5.5 points, bringing the combined ratio to 97.0%. Under this scenario, underwriting margins decline from 6.6% to 3.0%.
The reduction in margin reduces the sector’s capacity to absorb elevated losses, including severe convective storms early in the year and potential hurricane activity later in the cycle.
Catastrophe loss loads have increased over time, with the average rising from 2.7% in 2000-04 to 5.4% in 2020-25. The latest period recorded the largest increase among the five-year intervals reviewed.
Global insured natural catastrophe losses have exceeded $100 billion annually since 2020. In the US, cumulative inflation-adjusted insured losses increased from $252 billion in 2015–19 to $412 billion in 2020–24, with severe convective storms accounting for approximately 80% of the increase.
Quarterly data shows a shift in loss patterns. Q1 and Q2 catastrophe loss loads increased by 2-3 percentage points between 2015–19 and 2020–25, with severe convective storms accounting for 84% of losses during those periods. This trend has added pressure to combined ratios outside the traditional peak hurricane season.
The recent hard market improved underwriting outcomes despite rising losses. The composite combined ratio declined by 2.6 percentage points, from 96.0% in 2015–19 to 93.4% in 2020–25, supported by cumulative property rate increases of about 160% from 2017 to the 2024 peak, alongside tighter terms.
With rate reductions now earning through, catastrophe losses are expected to account for a larger share of combined ratios in the coming periods.
Performance differences among carriers have increased over time. The gap between the lowest and highest catastrophe loss load widened from 7.1 percentage points in 2000–04 to 11.7 points in 2020–25.
This divergence occurs despite broadly similar geographic exposure across nationwide carriers. The variation is linked to differences in underwriting approach, portfolio composition, and reinsurance use.
Volatility trends also vary at the carrier level. The five-year rolling standard deviation of catastrophe loss loads stood at 4.7% at the end of 2025. While the average change in volatility across the sample showed a decrease of 0.04% from 2015–19 to 2020–25, individual outcomes ranged from reductions of more than 6% to increases of over 2%.
Reinsurance continues to play a central role in managing earnings volatility. The January 2026 renewal period saw competitive market conditions, with reinsurers offering capacity across placements. Many insurers recorded savings on core programs, creating additional budget capacity.
Available capacity includes products that had been scaled back in earlier periods, including aggregate and frequency protections aligned with changes in underlying portfolios.
The combination of sustained catastrophe loss levels, declining rates, and widening performance differences is expected to influence reinsurance purchasing decisions. Carriers are assessing options to manage volatility and maintain underwriting performance in a lower-margin environment.
