The US property and casualty industry — the major customer of Bermuda reinsurance sector — is likely to experience negative growth of -3.7 per cent in the first half of this year, according to a new industry report.

P&C Economics and Underwriting Projections: A Forward View produced by the Insurance Information Institute with actuarial and consulting firm Milliman.

The report found that the industry showed improving underwriting conditions in 2025 following several years of elevated catastrophe losses, inflation-driven claims costs, and post-pandemic economic volatility.

The sector’s net combined ratio reached its lowest level in more than a decade, reflecting improved underwriting conditions across many major lines.

“The industry’s 2025 results should be viewed in the context of the significant financial strain insurers have faced in recent years,” said Michel Léonard, chief economist and data scientist at the Insurance Information Institute, also known as Triple-I.

“Although conditions have stabilised somewhat, insurers continue to operate in an environment marked by elevated catastrophe risk, higher claims severity and ongoing economic uncertainty.”

Mr Léonard added that insurance employment declined 1.8 per cent year-over-year in March, underperforming the broader labour market and reflecting continued weakness in sector employment conditions.

Underlying US P&C growth for the first half of 2026 is forecast at -3.7 per cent, down from 1.6 per cent in 2025, with recovery expected in 2027 and 2028, the report concluded.

Replacement cost growth is projected at 2.1 per cent for the first half of 2026, flat with 2025 levels, reflecting moderating claims severity pressures. In 2028, replacement costs are expected to exceed broader US inflation by 2028, reinforcing the need for continued pricing discipline across P&C lines.

Personal auto continued to improve in 2025, with an NCR of 91.8 per cent, improving 3.5 points from 2024. Net written premium growth slowed to 4 per cent, while underwriting conditions are expected to remain favourable.

Homeowners underwriting improved despite continued catastrophe activity, including the Los Angeles fires in the first quarter. The 2025 NCR was 88.1 per cent, the lowest in more than a decade, as replacement-cost pressures eased in 2025 and prior pricing actions helped offset catastrophe losses.

Underwriting conditions improved broadly across major lines, particularly in property-related areas, though profitability pressures remain elevated in several commercial segments.

General liability and commercial auto remain the only major lines above a 100 per cent NCR, though gradual improvement is expected through 2026 through 2028, the report stated.

Jason Kurtz, principal and consulting actuary at Milliman, noted that general liability and commercial auto continue to face significant profitability challenges.

“Litigation pressures and claims severity trends continue to result in elevated loss costs, constraining improvement in these segments despite broader industry strength,” Mr Kurtz said.