The American property and casualty insurance industry reported a sharp rise in underwriting income in the first half of 2025, even as catastrophe losses mounted, according to a new report from AM Best.

The industry booked $11.2 billion in net underwriting income for the six months to June 30, up from $2.9 billion a year earlier.

AM Best said the sector’s combined ratio improved to 96.4 per cent from 97.8 per cent in the prior-year period.

Catastrophe losses were a drag on results, accounting for 10.9 percentage points on the combined ratio, compared with 8.8 points a year earlier.

Losses from the January 2025 California wildfires were singled out as a key driver.

Stronger net earned premium growth of 7.5 per cent, coupled with higher investment income, helped lift results. Pre-tax operating income rose nearly 25 per cent.

Still, net income fell almost by half to $50.3 billion, reflecting a steep reduction in net realised capital gains, driven mainly by a $47.5 billion decline at National Indemnity Co.

“Growth of 7.5 per cent in net earned premiums in the six-month period offset increases in incurred losses and loss adjustment expenses, is largely attributable to the January 2025 California wildfires, and other underwriting expenses,” the report stated.

The findings were published in AM Best’s special report First Look: Six-Month 2025 US Property/Casualty Financial Results, based on interim statutory filings covering about 96 per cent of industry net premiums written.

The Bermuda Monetary Authority has noted that Bermuda reinsurance firms may absorb up to 30 per cent of the insured losses from those wildfires.

Previous Royal Gazette reporting shows that Bermudian-based reinsurers have already faced heightened combined ratios in part because of catastrophe losses.

For example, wildfires pushed up Bermuda market catastrophe losses to represent 7-to-8 percentage points on the 2024 combined ratio, up from about 3.2 points in 2023.

Specific companies have reported substantial wildfire‐related claims: Arch Capital Group, for example, estimated $450 million to 550 million in wildfire expenses, and reported a jump in its combined ratio in Q1 2025 largely owing to the California wildfires.