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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. A follow-up AM Best special report in June 2026 confirmed that stabilization is holding, with the property/casualty industry posting a $16 billion underwriting gain in Q1 2026 and pre-tax and net income roughly doubling compared to Q1 2025.
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:
- 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, moderate softening in property catastrophe rates has been observed, and January 2026 renewals saw further stabilization or minor price shifts, directly easing pressure on primary insurers. Learn more about how reinsurance affects your rates.
- Better pricing adequacy: Years of aggressive rate increases have finally brought many insurers to a point where premiums more accurately reflect actual risk.
- Stronger financial positions: Solid risk-adjusted capitalization, improved liquidity, and higher investment returns (net investment income rose 10% in Q1 2026) have strengthened insurer balance sheets across the board.
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Why Rates Are Still Rising, Just More Slowly
U.S. home insurance rates rose a cumulative 46.8% from 2020 to 2025, with 2025 alone up 6.0% nationwide. For 2026, most forecasts point to rate increases of less than 10% in the majority of regions, though states with recent disaster claims may see much steeper jumps. Either way, this represents a dramatic slowdown compared to the 12.7% peak in 2024. Learn more about the 2026 home insurance rate outlook for a deeper breakdown.
This is the fifth consecutive year of increases. Slower growth is progress, but it's not relief, especially for homeowners already stretched thin. Our guide to why home insurance premiums keep rising covers all the forces at play.
Factors Still Pushing Rates Higher
Despite the improved outlook, several powerful forces continue to drive premiums upward:
| Driving Factor | Impact Level | Notes |
|---|---|---|
| Severe Convective Storms | 🔴 High | Costliest insured peril of the 21st century |
| Climate Change & Wildfires | 🔴 High | 2025 LA wildfires drove ~$40B in insured losses |
| Tariffs on Building Materials | 🔴 High | NAHB estimates $10,900+ added per new home |
| Reinsurance Costs | 🟡 Moderate | Softening but still above pre-2023 levels |
| Rising Rebuild Costs | 🟡 Moderate | ENR materials index up ~4% year-over-year |
| Pending Rate Approvals | 🟡 Moderate | Filed increases still working through some states |
Severe convective storms (tornadoes, hail, and high winds) have officially emerged as the most costly peril, in some recent years surpassing hurricanes in annual insured losses. Learn more about severe convective storm coverage and how these events affect your policy. Broader climate-driven insurance costs are also reshaping availability.
Tariffs remain a critical wildcard. A 25% tariff on kitchen cabinets, furniture and vanities remains in effect until January 1, 2027, and a 50% Section 232 tariff on steel and aluminum imports remains in effect. Data from the NAHB April 2025 survey reveals that builders estimate a typical cost effect from recent tariff actions at $10,900 per home. Nonresidential construction input prices surged at a 7.1% annualized rate in January 2026 due to tariff-driven increases in steel, aluminum, copper wire, and industrial controls equipment, with tariffs driving a 4–6% increase in overall project expenses. Because insurers price policies based on the cost to rebuild, those material cost increases feed directly into higher premiums.
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Geographic Reality: Stabilization Is Not Universal
The national averages mask enormous geographic variation. Colorado had the largest 2025 increase at 18.3%, followed by Minnesota (17.0%) and Iowa (14.7%), while Florida (0.4%), Montana (0.5%) and Texas (0.6%) saw the smallest increases in 2025. That divergence is expected to persist and even widen in 2026, with Insurance.com projecting Louisiana (+58%), Michigan (+48%), Virginia (+37%), Kentucky (+33%), and Minnesota (+29%) leading the pack this year.
States Still Under Serious Pressure
California remains in crisis despite significant regulatory reform. A brokered deal with regulators and consumer advocates will allow State Farm General to keep the average 17% increase in homeowner rates that took effect after the January 2025 Los Angeles wildfires. Under the March 2026 agreement, State Farm agrees to forgo mass non-renewals in 2026 and undergo further review of its rates by 2027. On top of that, State Farm is now adding a temporary 1.13% FAIR Plan wildfire assessment fee on personal-line policy renewals starting December 1, 2025, for two renewal periods. Read our full breakdown of the California home insurance crisis for your specific options.
Florida now shows genuine signs of relief. Tort reforms passed in 2022 and 2023, combined with a below-average 2026 hurricane season forecast, are letting some Florida insurers actually cut rates for the first time in years. Explore our Florida home insurance guide for the latest carrier options.
Oklahoma, Nebraska, and Kansas remain among the most expensive states, driven by relentless severe convective storm exposure across Tornado Alley. Florida has the most expensive home insurance premiums in the country with an average annual cost of $9,449. In addition to Florida, Oklahoma, Mississippi, Louisiana and Nebraska have a cost exceeding $5,000 a year for home insurance, primarily driven by the threat of wind and hail.
What Homeowners Should Realistically Expect
The 2026 Atlantic hurricane season is projected to be below average. NOAA's Climate Prediction Center is forecasting a 55% chance of a below-normal season, a 35% chance of a near-normal season, and only a 10% chance of an above-normal season. The agency is predicting eight to 14 total named storms, of which three to six are forecast to become hurricanes, and one to three are predicted to reach major hurricane status. Colorado State University's June 10 update trimmed its forecast further to 11 named storms and 5 hurricanes, citing a likely moderate-to-strong El Niño by September and cooler tropical Atlantic sea-surface temperatures.
A quiet season would ease reinsurance pressure heading into 2027, but rate filings work on a lag. Even favorable weather in 2026 won't translate into immediate relief. The bottom line 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
- Shop and compare every year. Premium variance between insurers for the same home can exceed 40%. Use comparison tools to benchmark your current rate.
- Bundle home and auto. Multi-policy discounts typically save 10 to 25%.
- Raise your deductible. Moving from $1,000 to $2,500 can reduce premiums by 10 to 20%, if you can cover the difference out of pocket.
- Invest in risk mitigation. Impact-resistant roofing, storm shutters, updated electrical systems, and security systems all unlock discounts and demonstrate lower risk to insurers.
- Improve your credit score. Most states allow insurers to use credit as a rating factor. Improving your score can meaningfully reduce what you pay.
- Review your coverage annually. Make sure you're not over-insuring the land value (which can never burn down), but also don't leave yourself underinsured as tariff-driven replacement costs rise.
Understanding how state-level insurance reforms affect your policy is also important, since regulatory changes often silently reshape what you pay. If your premiums have become unmanageable, our guide to what to do when home insurance is too expensive 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 12.7% national peak in 2024 to under 10% in most regions.
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. AM Best's Q1 2026 special report confirmed that stabilization is holding, with the property/casualty industry posting a $16 billion underwriting gain and net investment income up 10%. These factors, combined, convinced AM Best that the segment is no longer deteriorating.
Which states will see the biggest home insurance increases in 2026?
According to Insurance.com projections, the steepest 2026 increases are Louisiana (+58%), Michigan (+48%), Virginia (+37%), Kentucky (+33%), and Minnesota (+29%), driven by hurricanes, hail storms, and reinsurance costs. California homeowners are absorbing State Farm's locked-in 17% increase plus a new 1.13% FAIR Plan surcharge. Oklahoma, Mississippi, Louisiana, and Nebraska all now exceed $5,000 in average annual premiums, while Florida (at roughly $9,449) leads the nation despite showing early stabilization signs.
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 strike quickly across the Midwest, Plains, and Southeast. These storms have become the costliest insured peril of the 21st century, generating tens of billions in annual insured losses. 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 to 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.