U.S. Commercial Auto Insurers See Dramatic 55% Drop in Underwriting Losses, AM Best Report Reveals

A $2.2 billion underwriting loss in 2025 certainly isn’t anything to celebrate in traditional corporate finance, but when it comes to the historically troubled sector of U.S. commercial auto insurers, there may finally be a reason to crack a smile.

According to a comprehensive new report from credit rating agency AM Best, that multibillion-dollar deficit actually represents a remarkable 55% improvement compared with the prior year. For an insurance line that has performed worse than any other commercial insurance line of business over the last decade, virtually any sign of forward momentum is deeply welcomed by underwriters, actuaries, and industry executives alike. During the 2025 calendar year, net premiums written across the sector increased by 6% year-over-year, while incurred losses remained essentially flat, creating a much-needed breathing room for carriers grappling with long-term profitability challenges.

To understand the significance of this shift, one must look at the sobering historical context of the market. Together, U.S. commercial auto insurers have booked a net underwriting loss in every single calendar year since 2015. Over the course of the last ten years, the line has faced a relentless onslaught of escalating claims severity, aggressive litigation trends, and soaring vehicle repair costs. In fact, some of the sector’s best financial years during this tumultuous decade ironically occurred during the COVID-19 pandemic, not because of structural underwriting improvements, but simply because government-mandated lockdowns and remote work meant significantly fewer vehicles were actively on the road.

The latest AM Best data suggests that the prolonged cycle of deterioration may finally be turning a corner. Commercial auto’s adverse reserve development in 2025 fell to its lowest level observed over the last 10 years, signaling that insurers are getting a much better handle on historical claim estimates and reducing the need to constantly shore up reserves for past accident years. Furthermore, there appears to be tangible operational momentum carrying over into the current year. The direct loss ratio for commercial auto improved to 66.1 for the first half of 2026, pointing toward continued stabilization. More broadly, the industry’s combined ratio—a key metric of insurance profitability calculated by dividing total incurred losses and expenses by earned premiums—improved significantly to 96.6 in 2025, a dramatic recovery from the 101.4 combined ratio recorded the prior year. Any combined ratio dipping below 100 indicates that an insurer is making an underwriting profit from its core operations before taking investment income into account.

A major driver behind this relative financial stabilization can be found on the physical damage side of the ledger. The physical damage component of commercial auto losses recorded a stellar $2.4 billion gain for the year. This positive development has been heavily influenced by structural changes in how commercial fleet operators manage their day-to-day risks. Insured businesses that have taken a more proactive approach toward advanced fleet monitoring, telematics, and rigorous preventative maintenance have directly benefited from a measurable reduction in the frequency of preventable accidents. According to David Blades, associate director of industry research at AM Best, these risk-mitigation measures have directly aided overall auto physical damage profitability, proving that technology and proactive safety protocols can successfully move the needle on claims frequency.

However, despite the encouraging news on physical damage and overall loss ratios, not everything in the commercial auto market is looking up. Persistent and severe structural challenges remain deeply entrenched on the liability side of the business, continuing to drag down the segment’s overall performance.

The segment’s underwriting loss for liability alone exceeded $4.6 billion in 2025. While that figure is undeniably staggering, it is worth noting that it represents an improvement when compared with even heavier liability losses of $6.39 billion in 2024 and $5.9 billion in 2023. Still, liability accounts for a massive 77% of commercial auto’s net premiums written, meaning that its financial trajectory affects overall profit and loss statements more than any other factor. The liability side of the business remains heavily impacted by adverse social and economic inflation trends on claims costs. Factors such as escalating medical expenses, higher costs for legal representation, and increasingly sympathetic juries continue to drive up the severity of liability verdicts and settlements, keeping pressure on insurers to manage these exposures carefully.

For commercial insurance buyers, however, these gradually improved financial results in the broader commercial auto market have finally begun to translate into some long-awaited pricing relief. After years of steep, double-digit rate increases that frustrated business owners and fleet operators across the country, AM Best noted that premium rate increases during the second quarter of 2026 were the lowest recorded in more than 10 years. As underwriting performance stabilizes and insurers regain a measure of confidence, the fierce upward trajectory of commercial auto rates is beginning to flatten, offering a welcome reprieve for businesses striving to manage their operational overhead in a complex economic environment.