Catastrophe losses continue to challenge the property and casualty insurance industry, according to a recent report from Conning. The first half of 2025 saw record-high losses, partly due to the devastating Los Angeles fires in January. Despite this, the industry managed a better combined ratio compared to the same period last year.
The report reveals that natural disasters, especially secondary events like severe storms and wildfires, are happening more often and causing more damage. Wildfires in particular have been intense this year, with over 28,000 recorded so far, burning more than a million acres—well above the ten-year average. This rise is pushing insurers to change how they underwrite policies, leading many to raise premiums, limit coverage, or pull out of high-risk zones altogether.
While some insurance customers have enjoyed rate cuts between 5% and 30% in the first half of 2025—especially those with strong risk profiles or single-carrier programs—others aren’t as fortunate. Properties vulnerable to wildfires, older wood-frame buildings, and homes with aging roofs exposed to wind continue to struggle to get good terms or lower rates.
The report also highlights growing costs tied to repairs and legal expenses. Issues like supply chain delays and a shortage of skilled workers have driven up repair prices faster than general inflation. Another pressure point is social inflation, where rising jury verdicts, litigation funding, and higher settlement costs add to insurers’ expenses.
On the economic front, the U.S. is expected to have moderate growth of about 2% through 2027, with unemployment falling to around 4.5% and inflation easing toward 2%. This could shift premium growth from rising prices to more based on exposure and risk.
Uncertainty remains high for the insurance industry due to factors like changing tariffs, government spending, and global political tensions. Still, this uncertainty could lead to greater demand for risk management services.
On the bright side, rising interest rates have boosted investment income for insurers. Even though rates are expected to gradually decline, they’re likely to stay at levels that help support earnings as insurers reinvest their portfolios.
Overall, the report paints a picture of an industry grappling with frequent and costly natural disasters, rising expenses, and economic unpredictability. But with these challenges come opportunities for insurers to adapt and better meet the needs of their customers.