The AM Best Upgrade: What "Stable" Actually Means

For the first time in several years, there's cautiously good news for homeowners bracing for their renewal bill. In December 2025, AM Best — the leading credit rating agency for the insurance industry — revised its outlook for the U.S. homeowners insurance market from Negative to Stable, now aligning it with the broader U.S. personal lines outlook for 2026.

But before you celebrate, it's important to understand what "stable" means in this context — and what it doesn't.

Why AM Best Upgraded the Outlook

AM Best's upgrade was driven by several converging improvements in the insurance market:

• Stronger catastrophe risk management: Insurers have significantly refined their risk appetites, adopted higher deductibles, adjusted coverage sub-limits, and deployed advanced technologies including AI, satellite imagery, drones, and predictive modeling to better assess exposure.
• Improved reinsurance conditions: After several years of steep rate increases for property catastrophe coverage, AM Best reported moderate softening in 2025, with January 2026 reinsurance renewals arriving stable with only minor price shifts — directly easing pressure on primary insurers. As AM Best noted, "improving reinsurance dynamics in 2025 helped to alleviate pressures in the homeowners' segment, fostering its resilience."
• Better pricing adequacy: Years of aggressive rate increases have finally brought many insurers to a point where premiums more accurately reflect actual risk — a critical milestone for market health.
• Stronger financial positions: Solid risk-adjusted capitalization, improved liquidity, and higher investment returns from elevated interest rates have strengthened insurer balance sheets across the board.

Why Rates Are Still Rising — Just More Slowly

The average annual premium is projected to increase 4% to about $3,057 in 2026, after jumping 12% in 2025. Other analyses from Cotality project a somewhat higher figure of around 8%. Either way, this represents a dramatic slowdown. The average premium for a new policy rose 8.5% year over year in 2025, a notable slowdown compared to the 18% jump in 2024.

This is the fifth consecutive year of increases, and since 2021, cumulative premium growth has totaled approximately 46% nationally. Slower growth is progress — but it's not relief, especially for homeowners already stretched thin.

Learn more about why home insurance premiums keep rising if you want a deeper breakdown of all the forces at play.

Factors Still Pushing Rates Higher

Despite the improved outlook, several powerful forces continue to drive premiums upward:

US home insurance premiums are set to rise for a fifth straight year in 2026 as insurers grapple with losses from extreme weather and high rebuilding costs. Severe convective storms — tornadoes, hail, and high winds — have emerged as the most costly peril, surpassing hurricanes in annual insured losses. Learn more about severe convective storm coverage and how these events specifically affect your policy.

Another underappreciated factor is the pipeline of pending rate approvals. Insurers in several states filed for significant increases in late 2024 and 2025 that haven't yet been approved or implemented — meaning some homeowners will see larger-than-expected jumps at renewal even as the broader market moderates.

Geographic Reality: Stabilization Is Not Universal

The national averages mask an enormous amount of geographic variation. Premiums in the 25 most expensive states rose by an average of 14% in 2025, compared with 5% in the 25 least expensive states. That gap is expected to persist into 2026.

States Still Under Serious Pressure

California remains in crisis despite regulatory reform efforts. California's home insurance market is seeing major insurers like State Farm, Allstate, and Farmers stopped writing new policies or non-renewing thousands of customers due to catastrophic wildfire losses, rising reinsurance costs, and outdated rate regulations. Projected increases for California homeowners in 2026 run as high as 16%. Read our full breakdown of the California home insurance crisis for your specific options.

Florida leads the nation at an average of $10,240 per year — 189% above the national average. However, there are early signs of relief: recent tort reforms and legislative changes are beginning to bear fruit, with some Florida premiums reportedly down as much as 11% for certain policyholders. How reinsurance affects your rates is an important piece of the Florida puzzle, as reinsurance availability has been a key driver of insurer exits in that state.

Texas homeowners pay roughly $7,020 annually — 60% above the national average — driven by hurricane exposure along the coast and severe convective storm risk inland.

What Homeowners Should Realistically Expect

The bottom line for 2026 depends heavily on where you live, your home's risk profile, and how proactively you manage your coverage.

Practical Steps to Lower Your Premium Now

1. Shop and compare every year — Premium variance between insurers for the same home can exceed 40%. Use comparison tools to benchmark your current rate.
2. Bundle home and auto — Multi-policy discounts typically save 10–25%.
3. Raise your deductible — Moving from $1,000 to $2,500 can reduce premiums by 10–20%, if you can cover the difference out of pocket.
4. Invest in risk mitigation — Impact-resistant roofing, storm shutters, updated electrical systems, and security systems all unlock discounts and demonstrate lower risk to insurers.
5. Improve your credit score — Most states allow insurers to use credit as a rating factor. Improving your score can meaningfully reduce what you pay.
6. Review your coverage annually — Make sure you're not over-insuring the land value (which can never burn down) or carrying duplicative coverage.

Understanding how home insurance and your mortgage escrow interact is also important — premium increases often silently inflate your monthly mortgage payment through escrow adjustments.

If your premiums have become unmanageable, our guide to the home insurance affordability crisis walks through every option available, including state FAIR plans for homeowners who've been dropped or priced out.

Frequently Asked Questions

Is the home insurance market actually stabilizing in 2026?

Partially — and it depends on where you live. AM Best's upgrade of the market outlook from Negative to Stable reflects genuine improvement in insurer financial health, pricing adequacy, and reinsurance conditions. However, "stable" applies to the health of the insurance industry, not to your individual premium. Most homeowners will still see rate increases in 2026, though growth has slowed significantly from the 18% pace of 2024 to a projected 4–8% nationally.

Why did AM Best upgrade the home insurance outlook to Stable?

AM Best cited several key improvements: moderate softening in reinsurance pricing, stronger insurer capitalization, better catastrophe risk management using advanced technology, and improved pricing sophistication that more accurately reflects actual risk. A relatively mild 2025 hurricane season — which produced 13 named storms but limited U.S. landfalls and damages — also helped give the market breathing room to recover. These factors, combined, convinced AM Best that the segment is no longer in a deteriorating trajectory.

Which states will see the biggest home insurance increases in 2026?

The steepest projected increases for 2026 include California (+16%), Nebraska (+13%), New Mexico (+11%), and Georgia (+10%). States in the Gulf Coast and Tornado Alley continue to face above-average pressures. The 25 most expensive states overall saw average increases of 14% in 2025, and that divergence from lower-risk states is expected to persist into 2026. Florida, while still the nation's most expensive state, is showing early signs of market improvement thanks to tort reform.

What is severe convective storm risk and why does it affect my premium?

Severe convective storms include tornadoes, hail, straight-line winds, and derechos — the type of intense but localized weather events that can strike quickly across the Midwest, Plains, and Southeast. These storms generated over $52 billion in insured losses in 2025 alone, making them the single costliest insurance peril in the country — even surpassing hurricanes in some years. Because these losses are difficult to predict and spread across large geographic areas, they drive up premiums even for homeowners hundreds of miles from the most-affected zones.

What should I do if my home insurance premium jumped significantly at renewal?

Start by calling your current insurer and asking specifically what drove the increase — sometimes errors in your home's profile, like an incorrect square footage or roof age, can be corrected. Then, shop at least 3–5 competing quotes before accepting the renewal. Look into bundling your auto and home policies, and ask about every available discount including security systems, loyalty, and claims-free history. If you're in a high-risk state and struggling to find affordable coverage, research your state's FAIR plan as a last resort — but understand its limitations before enrolling.