Rating Upgrades Increase for U.S. P/C Insurers in 2021

Ratings for the U.S. property/casualty industry returned to pre-pandemic levels with some companies strengthening balance sheets and improving operating results, said financial strength rating agency AM Best.

In 2021 the number of rating upgrades increased to 54, up from 38 the previous year, even as insurers continued to face ongoing COVID-19 implications, inflation, and higher loss costs.

The personal lines segment saw 32 upgrades and 11 downgrades in 2021, compared to 20 upgrades and 14 downgrades in 2020. Surplus levels began to rebound in late 2020.

“The higher surplus levels and favorable risk-adjusted capitalization at the start of 2021 positioned the segment to manage various challenges in 2021, including above average catastrophe activity, elevated reinsurance costs, and a return to pre-pandemic frequency trends, as well as increased loss severity,” said AM Best.

The personal lines segment maintained its stable outlook, according to AM Best, but negative outlooks for insurers continue to outnumber positive outlooks due to the frequency of catastrophe events, higher reinsurance costs, and market uncertainty.

There were 21 upgrades and 13 downgrades in the commercial segment in 2021, compared to 17 upgrades and 11 downgrades in 2020. For the most part insurers here maintained solid risk-adjusted capitalization and have experienced strong pricing momentum as well as favorable court rulings on many pandemic-related business interruption claims disputes.

AM Best said downgrades in commercial “were primarily driven by deteriorating underwriting results stemming from severe weather events and adverse reserve development in the commercial auto line, which led to unfavorable operating results.”

In Commercial, negative outlooks declined in 2021 compared to 2020 and AM Best revised its outlook from negative to stable for the segment thanks to the “modest impact” of COVID-19 and other factors. Looking ahead, concerns include inflation, economic recovery, loss costs, and the regulatory issues related workers compensation.

Topics Trends Carriers USA AM Best Property Casualty