The US property and casualty insurance industry posted a $1.1 billion net underwriting loss in the first quarter, a sharp reversal from a $9.4 billion gain during the same period last year, according to a new report by AM Best, the credit rating agency.

The losses were largely attributed to January’s devastating wildfires in California, which drove catastrophe-related claims sharply higher. AM Best estimates that catastrophe losses accounted for 14.7 percentage points of the industry’s combined ratio for the quarter, up from 5.4 points in Q1 2024. The combined ratio, a key measure of underwriting profitability, worsened to 99.4 from 94.4 a year earlier.

The figures are based on data submitted by insurance companies as of May 29, representing 96 per cent of the industry’s net premiums written.

While net investment income rose 2.4 per cent, pre-tax operating income declined 34.4 per cent to $19.6 billion. Net income dropped even more steeply, falling 50.4 per cent to $19.8 billion, weighed down by a 74.6 per cent plunge in net realised capital gains. AM Best attributed most of that decline to a $10.5 billion fall in realised gains at Berkshire Hathaway’s National Indemnity Company.

The full analysis is contained in AM Best’s special report, First Look: Three-Month 2025 US Property/Casualty Financial Results. The findings suggest that elevated catastrophe risks, already a top concern for the insurance and reinsurance market, continue to challenge underwriting profitability across the Atlantic as well.