For anyone involved in the personal lines insurance space—or simply anyone who owns a home—it’s no secret that homeowners insurance premiums have been climbing, particularly in catastrophe-prone states like Texas, Florida, and parts of the Midwest. The increasing frequency and severity of natural disasters, inflationary pressures on rebuilding costs, and tightening reinsurance markets have all played a role in pushing rates higher.

However, there is encouraging news emerging from the latest data on the U.S. homeowners insurance sector. According to a newly released report by S&P Global Market Intelligence (S&P GMI), the market is showing signs of recovery. After years of deteriorating profitability, 2024 marks a notable turning point for the industry.

Industry Profitability Sees a Positive Shift for the First Time in Half a Decade

One of the most significant milestones reached in 2024 is that the net combined ratio for the U.S. homeowners insurance market fell below the critical 100% threshold, landing at 99.3%. This means that, for the first time since 2019, the industry as a whole achieved underwriting profitability. In contrast, 2023’s combined ratio stood at a troubling 110.5%, reflecting a year of substantial losses and operating inefficiencies.

This 11.2-point improvement marks a pivotal shift and suggests that premium adjustments, cost controls, and risk mitigation strategies are beginning to bear fruit. The total direct written premiums surged by 13.4% year-over-year, totaling approximately $173.1 billion in 2024—a strong indicator of both rate increases and continued demand for coverage despite rising costs.

Alongside the improved combined ratio, the net loss ratio—which reflects the portion of premiums spent on claims—dropped to 65.2%, down from 75.5% in 2023. This 10.3-percentage-point drop represents the lowest net loss ratio the sector has seen since 2019, showcasing a much-needed reprieve from the mounting claims pressures of recent years.

Rate Increases Remain a Key Driver, but Growth Was Not Universal

While the improvement in loss and combined ratios is partly attributed to fewer severe losses and more disciplined underwriting, much of the financial recovery can be linked to substantial premium hikes. According to S&P GMI’s RateWatch tool, the average national rate for owner-occupied homeowners insurance increased by 11% in 2024, up from a 9.7% increase in 2023.

These rate adjustments were the result of what S&P GMI describes as “aggressive pursuit of rate approvals” by insurers. Many carriers sought and received approval from state regulators to implement double-digit increases in response to inflation in construction costs, increased reinsurance rates, and growing exposure to weather-related catastrophes.

However, it’s important to note that not every insurer benefited equally. While premium volume grew across the market, some carriers did not see a year-over-year increase in written premium. This discrepancy was especially visible among larger insurers facing challenges in specific regional markets.

Market Leaders: Who’s Winning and Who’s Struggling

S&P’s report provides detailed analysis on the top 20 homeowners insurance providers based on direct written premium. The three dominant players—State Farm, Allstate, and USAA—each experienced double-digit growth in premium volume and reported improved combined ratios. Their ability to adapt pricing, manage claims, and maintain customer loyalty contributed to these gains.

However, State Farm, the largest player in the market with $31.5 billion in direct premiums (a 16.4% increase from 2023), still ended 2024 with a combined ratio of 105.4%, indicating that the company continues to operate at a technical underwriting loss, despite gains in scale and revenue.

Several other major carriers also struggled to reach underwriting profitability. According to S&P GMI, four of the top 10 homeowners insurers posted combined ratios above 100, including:

• Auto Owners Exchange at 117.07%

• Nationwide at 105.8%

• State Farm at 105.4%

• American Family Insurance at 103.8%

Interestingly, Nationwide Mutual Insurance Co. was the only one among the top 10 to report a decline in direct premiums, falling 8.6% to just over $4 billion. Despite this setback, the company still managed a noteworthy 17.9-point improvement in combined ratio, though its final result of 105.8% still reflects underwriting losses.

In contrast, several companies posted strong profitability, including:

• Chubb with a combined ratio of 81.1%

• Farmers at 85.4%

• Allstate at 89.5%

• Liberty Mutual at 93.1%

These results highlight wide variation in underwriting performance, with some insurers better equipped to manage risk, price effectively, and avoid concentrated losses.

Regional Catastrophes Continue to Drive Loss Ratios in Certain States

Despite the national improvement in loss ratios, some states experienced significantly higher claims activity due to catastrophic weather events. Severe convective storms in Q2 and Q3 of 2024, along with Hurricane Helene, contributed to direct loss and loss-adjusted expense (LAE) ratios exceeding 90% in multiple states.

Nebraska stood out as the most heavily impacted state. The state endured two major storm systems in June, featuring tornadoes and large hail, which drove its direct loss/LAE ratio to a staggering 136.6%—the highest in the nation for the year.

These extreme figures serve as a reminder that while national averages may suggest stability, regional volatility continues to pose major challenges for insurers and reinsurers alike.

Looking Ahead: Recovery in Sight, But Risks Remain

The homeowners insurance sector appears to be turning a corner, with improved loss ratios and underwriting performance offering hope for a more sustainable business environment. However, the industry is not out of the woods yet.

Challenges such as:

• Climate change

• Reinsurance cost pressures

• Regulatory scrutiny of rate hikes

• Persistently high rebuilding costs

…continue to test the resilience of the market.

Still, the financial metrics of 2024 suggest progress. For investors, regulators, and policyholders alike, the latest data offers reassurance that insurers are adjusting—through better pricing, improved underwriting discipline, and innovative risk management.

For policyholders, however, relief in the form of lower premiums is unlikely to come immediately. Rate increases may slow, but with continued risk exposure and inflation, prices are expected to remain elevated in many areas.

Conclusion

The U.S. homeowners insurance market, after years of deteriorating performance, is starting to stabilize, with improved combined ratios and increased pricing power leading to better financial outcomes. While challenges remain and profitability is still uneven among carriers, the industry is showing measurable signs of recovery.

For insurers that can continue to balance pricing, risk selection, and claims efficiency, 2025 may offer further opportunities for stabilization and growth—particularly as they learn from the volatile years behind them and adapt to a future shaped by both climate and economic realities.