The U.S. homeowners insurance market showed a strong start to 2025, with total direct premiums rising by 10.7% in the first quarter compared to the same period last year. This steady growth follows four consecutive years of double-digit premium increases, although the pace in early 2025 was slightly lower than the roughly 13% gains seen in recent years. Despite this, homeowners insurers remain focused on raising rates to maintain solid profits, after finally breaking a five-year streak of combined ratios above 100% in 2024.
According to a recent report from AM Best, the homeowners insurance line posted a combined ratio under 100% last year for the first time since before 2019. This shows insurers have been able to bring losses and expenses under better control. Yet, keeping that momentum is challenging because of costly weather events. For instance, the direct loss ratio for the first quarter of 2025 jumped to 102.1%, largely due to January wildfires in California and damaging tornado outbreaks across several states.
Insurers are now heading into the 2025 Atlantic hurricane season, which runs until the end of November. This season will likely impact how well companies have priced and managed their risks so far this year. AM Best also highlighted a growing concern: changes at the National Oceanic and Atmospheric Administration (NOAA) will stop free updates to their database of billion-dollar climate and weather disasters. This may create gaps for insurers, agents, and policyholders who rely on detailed catastrophe data to set rates and plan coverage.
The report looked closely at how underwriting results vary across different states. In 2024, 10 states had combined ratios above 100%, marking more losses than premiums collected. These states include Nebraska, New Mexico, Georgia, and others. On average, their combined ratios have worsened by around 30 points over the last decade.
Among insurance companies, AM Best pointed to technology as a key factor helping better-performing carriers improve underwriting and loss prevention. Other important steps include rate increases and adjustments to cover inflation. The report named the top 20 homeowners insurers by direct premiums written in 2024.
USAA climbed to third place in 2024 with $11.9 billion in premiums, surpassing Liberty Mutual. Both USAA and the market leaders, State Farm and Allstate, recorded mid-teen percentage growth. Some insurers like Auto-Owners Insurance Group and The Cincinnati Insurance Companies saw even bigger jumps of about 30%.
Interestingly, some carriers made big gains in reducing their net loss ratios while shrinking premiums. Nationwide, for example, improved its net loss and loss adjustment expense ratio by more than 20 points but saw an 8.6% drop in premium volume. Farmers also cut its loss ratio by 22 points but grew premiums by 6%. On the other hand, Erie Insurance stood out as a rare company that ranked high in both premium growth and loss ratio improvement.
In contrast, Citizens Property Insurance Corporation and Universal Insurance, two major players in Florida, struggled with losses and premium growth last year. Citizens, which is shrinking its portfolio, had a loss ratio over 130% in 2024 and experienced a 15.3% drop in premiums.
Overall, the homeowners insurance market continues to face hurdles from natural disasters and changing risk landscapes. Still, insurers are pushing for higher rates and using new tools to strengthen their underwriting. How they perform through the 2025 hurricane season and beyond will be crucial for their ongoing financial health.