P&C Insurers Get Profit Boost From Tighter Expense Control, AM Best Finds
A new report shows a multi-year trend of improving expense ratios is helping bolster underwriting results, providing a tailwind against catastrophe and economic pressures.
A disciplined approach to cost management is paying dividends for U.S. Property and Casualty (P&C) insurers, leading to stronger underwriting results even as the industry braces for a return to more normalized profitability in 2026.
A new special report from the rating agency AM Best reveals that the P&C sector has successfully managed its expense structure over the past decade, providing a crucial lever to pull against volatile losses from severe weather events and economic shifts. This improvement in the underwriting expense ratio has been a key factor in bolstering the industry's bottom line.
The findings provide a positive counterpoint to a market expecting profits to cool. While 2025 was an exceptionally strong year for the sector, with some analysts pointing to the best underwriting results in over a decade, the consensus outlook for 2026 has been more moderate. Fitch Ratings, for example, projected in a recent outlook that the industry's combined ratio would likely rise in 2026 amid rising competition.
However, the AM Best analysis highlights the tangible benefits of cost containment. According to the report published Tuesday, the industry's combined ratio—a key measure of profitability where a figure below 100 indicates an underwriting profit—saw a significant improvement in 2024, falling 5.1 points to 96.6. This was driven largely by a 5.4-point drop in the loss and loss adjustment expense (LAE) ratio.
The report underscores that while macroeconomic factors and catastrophe losses have created significant volatility on the claims side, insurers have demonstrated greater control over their own underwriting expenses. This discipline allows for more resilient profitability, helping to offset periods of elevated claims.
This trend is particularly significant as the industry continues to grapple with the long-term challenges of climate change and its impact on the frequency and severity of natural disasters. After global natural catastrophe losses exceeded $100 billion for the sixth straight year in 2025, any structural improvement in profitability is a welcome development for investors.
While the AM Best report focused on data concluding in 2024, the theme of operational efficiency remains a central focus for carriers. The ability to maintain a lid on expenses provides critical flexibility, allowing insurers to remain competitive on pricing while protecting margins. This operational strength will be tested as the market heads into what is expected to be a more competitive landscape in 2026, but it provides a fundamental tailwind for the sector's performance.