The US property and casualty insurance industry posted a sharp turnaround in the first quarter of 2026, generating a $16.3 billion net underwriting gain after recording a $1 billion underwriting loss in the same quarter of the previous year. This improvement was supported by a 3.9% rise in net earned premiums and a 9.3% drop in incurred losses and loss adjustment expenses, even as dividends paid to policyholders increased by $5 billion.
A major factor behind the stronger result was the steep reduction in catastrophe losses. In the first quarter of 2025, results were heavily affected by the destructive California wildfires that occurred in January. According to AM Best, catastrophe losses represented 4.2 points on the combined ratio in Q1 2026, a substantial decline from an estimated 14.5 points a year earlier. This helped bring the combined ratio down to 92%, marking a seven-point improvement over the prior-year period.
Operating Performance and Reserve Development
AM Best also reported that, excluding $10.9 billion in favourable reserve development during the first three months of 2026, the industry’s accident year combined ratio stood at 96.6%. This indicates that underlying operating conditions remained solid even without the added benefit of reserve releases.
At the same time, insurers benefited from stronger investment performance. Net investment income earned increased by 10.3%, and when combined with the underwriting gain, it pushed pre-tax operating income up by 97% to $39.5 billion. In addition, net realised capital gains surged 141.5%, helping drive total industry net income to $41.8 billion, which was 107.7% higher than the same period a year earlier.
Capital Position Strengthens
The sector’s financial position also improved during the quarter. Industry surplus rose 2.2% from year-end 2025 to reach $1.3 trillion. This increase was mainly supported by a combined $47.6 billion from net income and contributed capital, although it was partially reduced by $15.5 billion in unrealised losses, other surplus declines, and stockholder dividends.
The first quarter results reflect a markedly stronger start to 2026 for the US P&C market, with lower catastrophe-related losses, improved underwriting performance, higher investment income, and continued capital growth all contributing to the sector’s recovery.
