The U.S. property and casualty insurance industry has had its best quarter in over 25 years, according to a new report from S&P Market Intelligence. The industry’s combined ratio for the third quarter of 2025 came in at an impressive 89.1, a figure not seen in nearly three decades. This number reflects how well insurers are managing their costs versus the premiums they collect.
Analysts Tim Zawacki and Husain Rupawala pointed out that this 89.1 combined ratio is the lowest since S&P has kept records going back to 2001. For context, the previous closest figures were 90.7 and 91.0 in 2006. What helped drive this strong performance was a rare quiet spell when it comes to catastrophe losses, alongside solid results in auto and homeowners insurance.
Catastrophe losses usually hit hard in the third quarter, but this year’s impact was notably mild. Public company data shows catastrophe losses affected loss ratios by just 1.7 points in the third quarter of 2025, compared to 7.9 points the year before and a typical median of around 6.9 points over recent years. That’s a big drop that helped keep overall losses low.
Another factor giving insurers a boost was a new low in the loss adjustment expense ratio, which covers the cost of handling claims. This dropped below 8.8 points, a new industry record. When adding pure loss ratios and these adjustment costs together, the combined loss and expense ratio hit 63.3, matching the figure from the same quarter in 2024. While the pure loss part alone wasn’t a record, the overall cost handling was a huge improvement.
Seven major U.S. insurance groups each reported more than $1 billion in net underwriting gains during the quarter. In contrast, only one group, Everest, faced a big underwriting loss of more than $100 million, mainly due to issues in their commercial liability lines. This is a sharp turnaround from last year, when only two groups reported gains over $1 billion and nine posted large underwriting losses.
Looking at specific insurance lines, personal lines like auto and homeowners shone brightest. But commercial lines didn’t fare as well. Auto liability loss ratios have been creeping up, and commercial liability loss ratios have increased steadily over the past year. Another area to watch is workers compensation, where the loss ratio rose to 52.5—the highest it’s been in a third quarter since 2017. This rise was partly offset by favorable reserve changes from California’s State Compensation Insurance Fund.
The report also highlighted a record $5.1 billion in favorable prior-year loss development for the quarter. That means insurers are benefiting from lower-than-expected claims from past years. This figure is nearly four times higher than last year’s $1.3 billion. However, some of this was inflated by a restructuring within Swiss Re Corporate Solutions, which, after adjustments, still leaves the industry with a large $3.5 billion gain—the biggest positive reserve adjustment in at least 15 years.
Despite the strong showing, S&P analysts warn that things might not stay this good for long. Growth is slowing, economic factors are uncertain, and higher catastrophe losses will likely return. For now, though, this quarter stands out as a rare bright spot for insurers after many tough years.