AM Best has maintained a stable market outlook for US commercial lines insurance in 2020, citing factors such as improved market conditions and solid capitalisation, which have offset short-term profitability challenges.
The rating agency noted that commercial lines pricing strengthened in 2019, while pressure on terms and conditions lessened.
In addition, the workers’ compensation segment remains a strong performer, despite continued pressure on rates.
However, analysts believe that the impact of social inflation on current-year losses and prior-year loss reserves remains a key headwind facing the overall commercial lines segment.
AM Best also feels that social inflation will be a difficult trend to curtail given the factors driving it, which include societal views of corporate liability, third-party involvement in litigation financing, and the emergence of legislation extending the statute of limitations on sexual abuse claims.
Other negative factors include property losses being above long-term averages and continued uncertainty about emerging casualty exposures such as cyber liability, opioids and e-cigarettes.
Momentum for price increases across commercial lines is expected to continue to accelerate in 2020, with pricing actions on the property side reflecting recent global catastrophe losses.
That said, reinsurers have also put forth higher rates and capacity restrictions to address loss trends, the largest of which have often fallen to the commercial property sector.
The commercial automobile line also remains challenged despite several years of substantial rate increases, analysts noted.
