Your property insurance just got more expensive. Not because of hurricanes or wildfires—because of something most consumers never see coming: casualty loss inflation.
Selective Insurance Group reported a combined ratio of 98.6% for Q3 2025, up sharply from 86.1% the prior year. Translation: For every dollar you paid in premiums, they paid out 98.6 cents in claims and expenses. That 12.5-point jump? Casualty losses added roughly 5 points to the combined ratio alone.
Here’s why this matters to your wallet: When insurers pay more in claims, premiums follow. And casualty costs—liability claims, bodily injury, legal settlements—are climbing across the entire property casualty sector, not just one company.
What’s Driving the 5-Point Casualty Loss Spike?
Casualty insurance covers you when someone gets hurt on your property, when you’re liable in an accident, or when your business faces a lawsuit. These claims are getting dramatically more expensive.
Three factors explain the surge:
- Medical cost inflation is outpacing general inflation. Bodily injury claims that cost insurers $50,000 three years ago now average $65,000–$70,000 due to rising healthcare costs, especially for emergency care and rehabilitation services.
- Legal settlements are climbing. Jury awards for pain and suffering have increased 15-20% since 2023, particularly in commercial liability cases.
- Claim frequency hasn’t dropped. Despite premium increases, people are still filing casualty claims at pre-pandemic rates, so insurers can’t offset severity with fewer claims.
Selective’s 98.6% combined ratio means they’re barely profitable on underwriting. The underlying combined ratio—stripping out catastrophe impacts—hit 93.2%, which sounds better until you realize the industry target is around 90% for sustainable profitability.
Why Independent Reserve Reviews Matter to Policyholders
Here’s something most consumers don’t know: Insurers estimate how much they’ll pay on claims that haven’t settled yet. These “reserves” determine whether your insurer stays solvent or faces financial trouble.
Selective did something smart—they brought in third-party actuaries to review their casualty reserves over the past 15 months, with additional independent reviews completed in Q3 2025. The verdict? Their booked reserves sit above the central estimate, meaning they’re setting aside more money than actuarial models suggest they’ll need.
That’s conservative. It’s also protective.
When insurers underestimate reserves, they face two problems:
- Sudden financial strain when claims exceed expectations. This can force premium spikes or coverage restrictions mid-year.
- Regulatory intervention if reserves prove inadequate, potentially impacting claim payments or policy renewals.
Selective’s approach—booking reserves above third-party estimates—creates a cushion against worsening casualty trends. For policyholders, this reduces the risk of mid-year policy cancellations or sudden premium jumps when claim costs exceed projections.
How This Hits Your Premiums in 2025-2026
The math is simple. Insurers lost money at a 98.6% combined ratio when investment income is factored separately. To return to profitability, they need combined ratios in the 88-92% range.
Getting there requires premium increases, underwriting discipline, or both.
What you’ll see:
| Coverage Type | Expected Impact |
|---|---|
| Homeowners (liability portion) | 8-12% increase on renewal |
| Umbrella policies | 10-15% increase due to casualty exposure |
| Commercial general liability | 12-18% increase, higher in litigious states |
| Auto liability (bodily injury) | 10-14% increase in medical cost-sensitive markets |
These aren’t hypothetical. Property casualty insurers are filing rate increases with state regulators now for 2025-2026 policy periods, citing casualty loss cost trends as primary justification.
States Where Casualty Inflation Hits Hardest
Not all markets face equal pressure. Casualty loss inflation varies by state based on legal environments, medical costs, and jury award trends.
High-risk states (expect steeper increases):
- California: Rising medical costs combined with plaintiff-friendly legal environment drive casualty losses 18-22% above national average.
- Florida: High bodily injury claim frequency due to auto accident litigation and medical provider billing practices push losses up.
- New York: Expensive medical care and high legal fees create 15-20% premium pressure on casualty coverage.
- Louisiana and Alabama: Jury awards in these states have climbed faster than anywhere else in the Southeast, adding 12-15% to casualty costs.
Moderate-risk states (expect average increases):
- Texas, Illinois, Pennsylvania: Medical inflation without extreme legal costs keep increases in the 8-12% range.
Lower-risk states (expect minimal impact):
- Utah, Idaho, Montana: Tort reform and lower medical costs limit casualty loss growth to 4-6%.
If you live in a high-risk state, shop your policy 90 days before renewal. Carriers price casualty exposure differently, and you might find 10-15% savings by switching even as the overall market hardens.
What Investors Should Know About the 98.6% Combined Ratio
Selective Insurance trades on NASDAQ under ticker SIGI. The Q3 results tell two stories depending on your time horizon.
Short-term concern: A 98.6% combined ratio means underwriting profitability is razor-thin. The company relies on investment income to generate overall profit, which creates vulnerability if bond yields decline or equity markets correct.
Long-term strength: Conservative reserve practices matter. Selective’s third-party validated reserves sitting above central estimates provide downside protection other insurers lack. When casualty losses inevitably worsen beyond current projections, Selective has buffer while competitors scramble to shore up reserves.
Compare that to insurers who reported 94-96% combined ratios but haven’t conducted independent reserve reviews recently. They look better now but face higher risk of reserve deficiencies later.
The Insurance Information Institute notes that casualty loss cost trends typically persist 3-5 years once established, meaning this pressure isn’t temporary. Insurers with conservative reserving will outperform peers who chase short-term profitability at the expense of reserve adequacy.
Should You Worry About Your Insurer’s Financial Stability?
Most property casualty insurers face similar casualty cost pressure, but not all manage it equally well.
Check these three signals:
- Combined ratio trends: Look for carriers reporting combined ratios under 95% consistently. Anything above 100% for multiple quarters signals underwriting losses.
- Reserve adequacy disclosures: Does your insurer mention independent reserve reviews? Do they acknowledge casualty loss trends? Transparency matters.
- Rating agency assessments: Check A.M. Best ratings. Insurers rated A- or better with stable outlooks have stronger reserve positions.
Selective maintains an A+ rating from A.M. Best, reflecting strong capital position despite the combined ratio pressure. That rating indicates they can weather casualty loss trends without threatening policyholder claims.
For comparison, insurers with ratings below B++ face higher risk of financial strain, which can delay claim payments or limit coverage availability during renewals.
Frequently Asked Questions
What caused Selective Insurance’s combined ratio to jump from 86.1% to 98.6%?
Rising casualty loss costs added roughly 5 points to the combined ratio. Medical cost inflation, higher legal settlements, and sustained claim frequency drove bodily injury and liability claims significantly higher year-over-year. Light catastrophe activity helped offset some pressure, but casualty losses dominated the increase.
Will my homeowners insurance premium increase because of casualty loss trends?
Yes, expect 8-12% increases on the liability portion of your homeowners policy during 2025-2026 renewals. Insurers are filing rate increases with state regulators now to offset casualty loss inflation. Umbrella policies face even steeper hikes, typically 10-15%, because they cover liability claims that exceed your primary policy limits.
How do independent reserve reviews protect policyholders?
Independent actuaries verify that insurers are setting aside enough money to pay future claims. Selective’s reserves sit above third-party central estimates, creating a financial cushion if casualty losses worsen beyond current projections. This reduces the risk of mid-year premium spikes, policy cancellations, or delayed claim payments that occur when insurers underestimate reserves.
Should I switch insurers to avoid casualty cost increases?
Shopping makes sense, but understand that all property casualty insurers face similar casualty loss pressure. Focus on carriers with A- or better A.M. Best ratings and combined ratios under 95%. Get quotes 90 days before renewal—you might find 10-15% savings even as the overall market hardens, especially if you live in high-risk states like California, Florida, or New York.
What is a combined ratio and why does 98.6% matter?
A combined ratio shows how much an insurer pays in claims and expenses per dollar of premium collected. 98.6% means Selective paid out 98.6 cents for every premium dollar—barely profitable on underwriting alone. The industry target is around 90% for sustainable profitability. Combined ratios above 100% indicate underwriting losses, forcing insurers to rely entirely on investment income for profit.
Bottom Line: What This Means for Your 2025 Insurance Costs
Casualty loss inflation isn’t going away. Medical costs keep rising faster than general inflation, legal settlements are climbing, and claim frequency remains stubbornly high. Selective’s 98.6% combined ratio reflects industry-wide pressure, not company-specific issues.
Expect premium increases on liability coverage across homeowners, auto, and commercial policies. Shop your coverage 90 days before renewal, especially in high-cost states. Focus on financially strong insurers with A- or better ratings who can weather casualty cost trends without threatening your coverage.
The silver lining? Selective’s conservative reserve practices—validated by independent third parties—suggest they’re managing risk prudently. That matters more than a single quarter’s combined ratio when you need your insurer to pay a major claim three years from now.
For more information on property casualty insurance trends, visit the National Association of Insurance Commissioners or check your state insurance department’s rate filing database to see what premium increases your insurer has requested.