Homeowners Insurers Report Record Performance in 2024: But 2025 Could Be Disappointing
A new report shows homeowners insurance companies just had their best performance since 2013.
The property and casualty (P&C) insurance industry in the United States had a net combined ratio (NCR) of 96.6 for 2024, a 5.1-point boost from the previous year – and the best performance in over a decade.
In comparison, 2023 was one of the worst years for the homeowners insurance market, with a reported NCR of 110.0%.
That report comes from the Insurance Information Institute and Milliman.
Property and Casualty (P&C) insurance includes most ordinary residential and commercial insurance companies in the United States, including auto insurance companies and home insurance companies.
Many of these companies struggled post-pandemic. After initially experiencing a drop in claims during the pandemic, these insurers later faced skyrocketing costs in its aftermath. Insurers could only raise rates so much.
According to S&P, US homeowners insurance rates have risen by double-digit percentage points each of the last two years. Some insurers, meanwhile, continue to petition regulators for the ability to charge higher rates – like State Farm asking for permission to raise rates by around 30% in California.
It’s possible the combination of higher rates and stabilizing claims is working to solidify P&C insurance profitability – at least according to 2024’s numbers.
What is the Net Combined Ratio in Insurance?
The net combined ratio, or NCR, is an important profitability metric in the insurance space.
To get NCR, you compare an insurer’s net claims and expenses to its net earned premiums:
- Net combined ratio indicates the profitability of an insurance company.
- It compares the amount of money coming in (via policyholder premium payments) to the amount of money going out (via expenses and claims payments)
- If the NCR is under 100%, the insurer made a profit, collecting more premiums than it paid in claims in expenses.
- If the NCR is over 100%, the insurer reported a loss and paid more in claims and expenses than it made in premiums.
Let’s say an insurer collected $1,000,000 in premiums in 2024. Policyholders, meanwhile, made $900,000 worth of claims and the insurer had additional expenses of around $50,000, giving a net combined ratio of 95.0. That’s great! The insurer was profitable, collecting more money from premiums than it paid in claims.
In a bad year, things would change. Let’s say by the end of 2025, the insurer has collected the same $1,000,000 in premiums. However, multiple natural disasters and higher tariff prices caused the company to spend $1,200,000 in claims and the same $50,000 in additional expenses, giving a net combined ratio of 125.0. The insurer reported a loss.
Homeowners Insurance Net Combined Ratio Over the Years
As reported by S&P Global, the net combined ratio in the homeowners insurance industry has swung from really good years (like 89.8 in 2013) to really bad years (like 110.5 in 2023).
Here’s the net combined ratio for homeowners insurance companies (not the overall P&C insurance industry) from 2013 to 2023, as reported by S&P Global:
- 2013: 89.8
- 2014: 92.0
- 2015: 91.3
- 2016: 92.8
- 2017: 106.7
- 2018: 103.5
- 2019: 97.9
- 2020: 106.9
- 2021: 103.3
- 2022: 104.0
- 2023: 110.5
2024 appears to have temporarily bucked that rising trend with an NCR of 96.6 across the entire property and casualty insurance marketplace. However, 2025 could bring more losses to the industry.
2025 is Looking Rough for P&C Insurers
2024 was a great year for the property and casualty insurance market. However, 2025 could be worse.
According to the same report, two big issues are weighing on the industry in 2025:
- The 2025 California fires
- Tariffs
The Los Angeles wildfires in January 2025 were the costliest wildfires in United States history. State Farm, California’s largest insurer, reported its biggest loss ever and expects to pay around $8 billion in claims.
Tariffs, meanwhile, have increased the cost of construction, repairs, and replacements for both homes and vehicles. Homeowners and auto insurance companies have already warned of significantly higher rates as a result of tariffs.
As the Triple-I blog explains, tariffs are beginning to “exert pressure on fundamental growth metrics” while “contributing to the escalation of replacement costs” across multiple lines of insurance, including personal auto, homeowners, renters, commercial auto, and commercial property insurance.
Liability Marketplace Also Facing Headwinds in 2025
At least the “casualty” part of property and casualty insurance is doing okay, right?
Unfortunately, analysts are also seeing headwinds in the general liability segment.
As reported by the Insurance Information Institute, the general liability segment just reported its least favorable net combined ratio since 2016 – and the third worst since 2010.
- For various reasons, the number of liability claims has risen sharply in recent years. More people are suing each other, and more companies are paying massive settlements than ever:
- As Allianz Commercial insurance reports, there has been a growth in “supersized court awards” that has been a significant factor in the “spiraling cost of liability claims.”
- Specific areas of commercial insurance litigation, including pharma class action lawsuits and issues with “forever chemicals,” have created a “challenging market” for liability insurers.
- Defective product claims alone have accounted for more than 40% of the liability claims market over the past five years, making them the costliest segment of the industry.
The personal liability insurance marketplace has also seen increasing claims and rising costs. The Miami Herald claims Florida had “outrageous litigation bonanzas” over the last few years, for example, before enacting legislation to curb the growing crisis.
More people are suing each other – and more companies are paying huge settlements – leading to higher costs across the liability space.
What’s Next for Insurance NCRs?
Insurance had a good year in 2024 with a net combined ratio of 96.6.
Unfortunately, 2024 seems like a temporary blip instead of the start of a new trend. With insurers reporting NCRs over 100 since 2020, the industry is expecting higher costs and more losses in 2025 because of tariffs, fires, and increasing litigation.