In a new report from AM Best, the rating agency has stated that it has maintained its market segment outlook for the US commercial lines segment at stable.
The rating agency cited factors including the segments strong underwriting performance throughout the COVID-19 pandemic and amid the ongoing economic volatility.
According to the report, titled ‘Market Segment Outlook: U.S. Commercial Insurance’, higher fixed-income re-investment rates will serve to drive profitability across all commercial lines, most notably within the casualty business.
Best notes that headwinds entering 2023 are clearly more pronounced than a year ago, and commercial lines insurers will be pressed to sustain pricing adequacy and to prepare for contraction of market opportunities and potential increased litigation.
Best states that this is being driven by factors including stubbornly elevated inflation, reflecting supply-chain disruptions and increased commodity and labor costs that are driving loss costs in the property lines.
Additionally, social inflation costs, which include jury awards and litigation expenses, are expected to rise, which will affect the casualty lines in terms of prospective underwriting and reserve margins.
The report also highlights the growing fears in some quarters of an economic recession in 2023, which includes disruptions in important economic segments and workforce dislocation, with there being a potential impact on certain professional liability segments as well as other lines.
“The stable outlook reflects our expectation that, on balance, the segment will remain profitable, its risk-adjusted capital will remain sound, and the segment will be resilient in the face of these near- and longer-term challenges,” said Michael Lagomarsino, senior director, AM Best.
Furthermore, Best highlights that commercial lines insurers have reported positive robust underwriting results through the third quarter of 2022 and are expected to continue to do so, driven by strong net premiums earned on the heels of prior year rate increases and continued growth in net premiums written.
Meanwhile, in another recent report, Best stated that it maintaining a stable market segment outlook on the US life/annuity insurance industry for 2023.
