US Commercial Auto Losses Narrow 55% in 2025, AM Best Reports

Underwriting results improve, but the record is still mixed

U.S. commercial auto insurers cut their underwriting loss by 55% in 2025, to $2.2 billion, according to AM Best. That’s a substantial improvement, but it comes after a long period of losses: the line has posted an underwriting loss every year since 2015. The result offers a clearer sign of progress, though liability claims continue to weigh heavily on profitability.

The combined ratio improved to 96.6 from 101.4 in 2024. Because a ratio below 100 generally indicates that premiums exceeded claims and expenses on an underwriting basis, the figure points to a better balance in the business. It doesn’t, by itself, explain which changes drove that improvement or establish that the gains will persist.

Net premiums written rose 6% year over year, while incurred losses were essentially flat. That combination helped the overall result: premium growth can support underwriting performance when losses don’t rise at the same pace. But one year’s figures can’t show whether this reflects lasting improvements in risk selection and pricing, or conditions that may change.

Commercial auto also recorded its lowest adverse reserve development in a decade. Reserve development reflects revisions to estimates for claims from earlier periods; lower adverse development means those revisions added less pressure than in prior years. It’s a welcome part of the picture, though the measure doesn’t remove the uncertainty insurers face when claims take time to settle.

Physical damage turns profitable

Physical damage produced a $2.4 billion underwriting gain in 2025. AM Best associate director of industry research David Blades attributed the result in part to fleet operators’ monitoring and maintenance practices. He said more proactive insureds had reduced preventable accident frequency, likely supporting profitability in the segment.

That account points to a practical source of improvement: how vehicles are maintained and how fleet risks are managed can affect the frequency of accidents that lead to claims. Still, the reported gain doesn’t establish how much of the result came from those practices, as opposed to other factors. The distinction matters because operating changes may take time to adopt across a broad group of insureds.

This is more significant than it looks. A profitable physical damage segment gives insurers a meaningful source of support when other parts of commercial auto remain under pressure. But it can’t offset every liability loss, especially when liability claims are both large and central to the business.

Liability remains the main constraint

Liability generated an underwriting loss exceeding $4.6 billion in 2025. That was lower than losses of $6.39 billion in 2024 and $5.9 billion in 2023, so the direction has improved. And yet, liability still dominates the premium base: it represents 77% of commercial auto net premiums written.

That share helps explain why the segment’s results carry so much weight in the overall line. Physical damage can post a strong gain, but liability’s larger presence means persistent losses there can constrain the combined outcome. (And this is the part most people overlook.) The split between the two segments is central to judging whether the headline improvement can last.

Social and economic inflation continue to push up liability claim costs. These pressures can increase the cost of settling claims even when the number of claims doesn’t rise, leaving insurers exposed to severity as well as frequency. The sector’s improvement is meaningful, but the persistent liability burden leaves the business sensitive to claims severity.

For insurers, the key challenge is holding onto better underwriting results while claims costs remain elevated. If you’re working in this space, the figures suggest that physical damage performance and liability severity deserve separate attention: the combined ratio alone can hide how differently those segments are behaving.

Pricing eases as the next test approaches

AM Best’s report also points to pricing relief for commercial auto buyers. Rate increases in the second quarter of 2026 were the lowest in more than 10 years, following the improvement in insurers’ financial results. That may ease pressure on buyers, but slower rate increases also make the durability of underwriting gains more consequential.

For the first half of 2026, the direct loss ratio stood at 66.1. That figure adds a more recent indicator, though it covers only the first half of the year and shouldn’t be treated as a full-year result. It also doesn’t resolve the question raised by the liability business: whether claim costs can be contained as pricing changes.

The line’s long run of underwriting losses makes the 2025 figures a notable shift, but they don’t yet establish a durable turnaround. The next test is whether insurers can sustain favorable results while liability costs remain elevated. A better year, clearly. A settled trend, not yet.