Premiums Now, Claims Later: How Insurers Earn on the Wait
Summary
U.S. life-and-health and property-casualty insurers wrote about $2.2 trillion of direct premiums in 2025 (Federal Insurance Office). This Sky survey follows the property-casualty half from premium to claim: losses, expenses, and policyholder dividends came to 93.03 percent of premiums, insurers carried $1.0 trillion of reserves for claims on policies already written, and $2.7 trillion of cash and invested assets earned $89.7 billion.
Premiums first, claims later
The federal industry classification⧉ the Census Bureau publishes states the model plainly: insurance carriers underwrite policies and invest premiums "to build up a portfolio of financial assets to be used against future claims." Premiums, it adds, are set on probable payouts and "expected investment returns on reserves."
Where the premium goes
After ceding some risk to reinsurers, property-casualty insurers kept $979.3 billion of net premiums written in 2025⧉. The industry's combined ratio⧉ measures claims against premiums earned and other costs against premiums written. In 's figures, losses incurred came to 57.63 percent of premiums and loss adjustment, the cost of settling claims, 8.95. Commissions, salaries, taxes, and overhead took 25.82, and dividends to policyholders 0.64. 's combined ratio, 93.03 (the rounded parts add to 93.04), was the lowest in ten years: by this measure, premiums covered claims and costs with about 7 percent to spare.
View data as table
| Losses incurred (claims) | 57.6% | loss ratio |
|---|---|---|
| Loss adjustment (settling claims) | 9% | loss adjustment expense ratio |
| Commissions | 10.7% | net commission ratio |
| Salaries and benefits | 6.7% | |
| Taxes, licenses, and fees | 2.4% | |
| Administrative and other | 6.1% | the four expense rows make 's 25.82 expense ratio |
| Policyholder dividends | 0.6% | |
| Underwriting margin | 7% | 100 minus the 93.03 combined ratio (approximate) |
The money in between
Some obligations, like auto claims, are shorter-term; general liability, medical malpractice, and workers' compensation are longer-tailed⧉. At the end of 2025, insurers carried $1.0 trillion of loss and loss-adjustment reserves⧉ for claims on policies already written, up 5.3 percent in a year. Reserves are estimates: when the estimate for older claims falls below what was reserved, the excess is released into underwriting income. That favorable development was the largest in ten years and helped lower the 2025 ratio.
Insurers invest that money alongside their own capital, $1.2 trillion of policyholder surplus⧉, a cushion for unexpected claims. With other funds on the balance sheet, cash and invested assets totaled $2.7 trillion at the end of 2025: 55 percent bonds, 25 percent common stock (almost 11 percent⧉ without two companies' outsized holdings), 11 percent cash and short-term holdings. They earned $89.7 billion of net investment income⧉ in 2025; puts the net yield on invested assets at 3.44 percent.
View data as table
| Bonds | 55.1% | |
|---|---|---|
| Common stock | 24.9% | almost 11% without two companies' outsized holdings |
| Cash and short-term investments | 10.9% | |
| Other investments | 6.7% | alternative investments, hedge funds, joint ventures, and the like |
| Mortgage loans, preferred stock, real estate, derivatives | 2.4% | 1.18 + 0.63 + 0.49 + 0.05 |
Two streams
Underwriting alone runs close to even: the combined ratio averaged about 99.6 over ten years⧉ and topped 100 in four of them⧉, most recently 2022 and 2023, years when premiums did not cover losses and expenses. Net investment income was 8.4 percent of sector revenue in 2025, near its ten-year average of about 8.2. Property-casualty insurers, notes, lean on it less than life-and-health insurers, given shorter contracts. Net income was $150.3 billion.
- Claims and costs took 93.03 percent. Property-casualty insurers kept $979.3 billion of net premiums written in 2025. By the industry's combined ratio, losses, claim settlement, commissions, salaries, taxes, overhead, and policyholder dividends came to 93.03 percent of premiums, the lowest in ten years. The ten-year average was about 99.6.
- The wait is large. At the end of 2025 they carried $1.0 trillion of reserves for claims on policies already written, up 5.3 percent in a year; releases from reserves set in earlier years helped 2025's results.
- The money is invested meanwhile. At the end of 2025 they held $2.7 trillion of cash and invested assets, about 55 percent bonds and 25 percent common stock (almost 11 percent without two companies' outsized holdings). Net investment income was $89.7 billion in 2025; puts the net yield at 3.44 percent.
Where this sits: This is one slice of Sky: Industries, a survey of how the money moves, industry by industry. Insurance's first slice is property-casualty underwriting and the reserves it invests; the next obvious slice is life insurance and annuities; 's life-and-health sector held about $9.9 trillion of total assets⧉ at the end of 2025 (including $3.5 trillion in separate accounts), against about $3.2 trillion for property-casualty. With insurance, the roadmap's first ten industries are cut. Sector figures are 's, from Global statutory data for the 2,701 property-casualty insurers licensed in 2025, and exclude health-only insurers; ratios are as reports them. 's industry carries the title of NAICS subsector 524⧉, which also counts agencies, brokers, and health insurers.
Sources(6) ▾
- Federal Insurance Office, U.S. Department of the Treasury, Annual Report on the Insurance Industry (September 2026) (2026-09-30) — 's statutory annual report, 79 pages, read in full text with pdftotext. Section II covers the industry through December 31, 2025, using Global Market Intelligence statutory data drawn May 12, 2026 (footnote 29), for the 712 life-and-health and 2,701 property-casualty insurers licensed in 2025, excluding health-only insurers. Used for: the analysis's ten-year window, 2016-2025 (p. 9); combined direct premiums written ($2.2 trillion) and their split (pp. 10-11); life-and-health and property-casualty total assets (p. 11); property-casualty net premiums written ($979.3 billion) and their 4.9 percent growth (p. 41); the combined ratio and its components for 2021-2025 (Figure 25 and footnote 91, p. 43); reserve development (pp. 44-45); net investment income, cash and invested assets, and net yield (p. 48); investment income's share of revenue, its role relative to life insurers, and net income (p. 49); policyholder surplus (Figure 31, p. 52); loss and loss-adjustment-expense reserves and their ratio to surplus (pp. 53-54); portfolio composition (Figure 35, p. 55); claim duration by line (p. 56); the common-stock concentration note (footnote 129, p. 57); and net premiums earned growth and the income statement's earned and written premium bases (p. 58 and footnote 130). Page numbers are the report's printed page numbers; PDF page = printed page + 6. home.treasury.gov · original document
- U.S. Bureau of Economic Analysis, GDP by Industry: Value Added by Industry (Tables TVA105 and TVA110), annual data 1997–2025 (2026-09-30) — 's summary-level value-added workbook, 'Data published September 30, 2026', read with openpyxl in the 2025 column. TVA105-A gives of $30,861,292 million (line 1) and value added of $942,955 million for insurance carriers and related activities (line 58); TVA110-A puts that industry at 3.1 percent of (line 58). apps.bea.gov · original document
- U.S. Bureau of Economic Analysis, National Income and Product Accounts, Section 6: Table 6.4D, Full-Time and Part-Time Employees by Industry (2026-09-30) — 's NIPA Section 6 workbook (data published September 30, 2026), sheet T60400D-A, 2025 column: insurance carriers and related activities had 3,025 thousand full-time and part-time employees (line 60). apps.bea.gov · original document
- U.S. Census Bureau, 2022 NAICS Descriptions (North American Industry Classification System) (2021-12-30) — The Census Bureau's workbook of 2022 industry definitions, read with openpyxl. Dated by the workbook's own metadata (docProps/core.xml: created 2021-12-22, modified 2021-12-30). census.gov's Last-Modified header reads 2026-07-13, but that is a server date: the content is byte-identical to the 2026-05-07 Wayback capture. Subsector 524, 'Insurance Carriers and Related Activities' (the title of 's industry line), covers underwriting and the selling and servicing of policies; industry group 5241, 'Insurance Carriers', is defined as underwriting policies and investing premiums in a portfolio of financial assets 'to be used against future claims', with premiums set on probable payouts and 'expected investment returns on reserves'; 52411 includes health and medical insurance carriers; 524291, claims adjusting, is investigating, appraising, and settling insurance claims. census.gov · original document
- Federal Insurance Office, U.S. Department of the Treasury, Annual Report on the Insurance Industry (September 2021) (2021-09-30) — 's September 2021 statutory annual report, 126 pages, read with pdftotext. Used only for Figure 23, ' Sector Combined Operating Ratios' (printed p. 29, PDF p. 41), which gives the Global combined ratios for 2016-2020: 100.76, 103.85, 99.32, 99.01, and 98.78. These are the five years of 's 2016-2025 ten-year window that the 2026 report's Figure 25 does not show. With the 2026 report's 2021-2025 values, the ten years average 99.567, matching 's 'approximately 99.6'. The date is the report's printed month; its PDF metadata shows a last modification on 2021-09-30. home.treasury.gov · original document
- National Association of Insurance Commissioners (NAIC), U.S. Property & Casualty and Title Insurance Industries: 2025 Full Year Results (2026-06-01) — The state insurance regulators' association's 17-page analysis of 2025 statutory results. cites it as its footnote 92 ( 2026, p. 44). Read with pdftotext. content.naic.org served curl a bot-check page (HTTP 403) but returned the PDF to a plain HTTP client, with no redirect, on 2026-10-18. The PDF carries no printed date; 2026-06-01 is its embedded creation date (the server's Last-Modified is 2026-06-02). Used only to show how the industry's combined ratio is built: the p. 1 results table (net premiums written and earned, net losses incurred, loss expenses incurred, underwriting expenses) and the p. 5 text tie the net loss ratio to premiums earned and the expense ratio to premiums written. NAIC's aggregates are its own, not the Global figures reports, so no NAIC number appears in the article. content.naic.org · original document
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Insurance carriers and related activities added $943.0 billion of value in 2025⧉, 3.1 percent of , with 3.0 million full- and part-time employees⧉. Life-and-health and property-casualty insurers wrote about $2.2 trillion of direct premiums⧉, roughly half each. This slice follows the property-casualty half, which insures against property damage and liability, through the gap at the center of the business: premiums come in first, claims are paid later, and the money is invested in between.