The U.S. property/casualty (P/C) industry’s rating activity over the first half of 2015 turned negative as downgrades and negative outlooks outpaced upgrades and positive outlooks, according to A.M. Best.
This activity reversed a two-year positive trend, the ratings agency said.
The number of downgrades year over year more than doubled for the first six months of 2015, to 36 from 15, according to the A.M Best Special Report titled, “P/C Industry Sees Negative Rating Activity in 2015, Reversing Positive Two-Year Trend.”
The reversal in P/C ratings was generally caused by several factors including: individual company trends of negative operating performance over several years; reductions in risk-adjusted capitalization to levels that were not supportive of current ratings due, in some cases, to aggressive premium growth outpacing policyholders’ surplus or changes in organizational structure as a result of increased or decreased parental support.
Even though the rating activity is trending negative, rating affirmations remain the most common rating action, accounting for 82.6 percent, the report notes.
The A.M Best Special Report, titled, “P/C Industry Sees Negative Rating Activity in 2015, Reversing Positive Two-Year Trend,” reports that:
- The rating activity among U.S P/C carriers’ issuer credit ratings (ICRs) through mid-year 2015, compared with the same period for 2014, has created a decline in the number of rating affirmations and in the percentage of total rating actions represented by affirmations. The number of downgrades year over year more than doubled for the first six months of 2015, to 36 from 15;
- The commercial lines segment has a stable outlook for 78.8 percent of its ratings, with downgrades outpacing upgrades, the number and percentage of negative outlooks (42 or 9.0 percent) continues to outpace the number and percentage of positive outlooks (27 or 5.8 percent); and
- The personal lines segment had 75.7 percent of its rating units with a stable outlook through mid-year 2015, a modest year-over-year increase from 74 percent in 2014. However, negative outlooks outpaced positive outlooks, 44 and 23, respectively, continuing this particular trend for the third consecutive year.
Life and health insurers also saw fewer positive rating actions in 2015, A.M. Best said in a companion report, which cited persistent low interest rates along with the impact of the Patient Protection and Affordable Care Act (ACA) as having an impact on ratings.
Was this article valuable?
Here are more articles you may enjoy.