A.M. Best Trend: Negative Insurer Ratings Outnumber Positive in 2015 First Half

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:

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.