The US property/casualty insurance sector’s commercial lines segment has secured an improved ‘stable’ outlook from AM Best, off what is described as a relatively modest negative COVID-19, strong pricing momentum and favourable rulings on many business interruption disputes.
The rating agency cites pandemic-driven uncertainty, both in an economic and broader sense, for the sector’s downgrade to ‘negative’ last year.
However, following the modest effect COVID-19 has had on sector performance, as well as continually improving underwriting results, AM Best has decided to reassess.
The rating agency also notes how litigation related to denial of coverage for business interruption claims generally has been resolved in favour of insurers.
As a result of the above, several key commercial lines of business, including workers’ compensation, commercial property and surety, have also had their outlooks revised to reflect this.
However, caution is urged amid higher inflation, supply chain issues and labor shortages.
Regardless, AM Best’s expectation is for the segment to have the capital needed in order to manage through any temporary increases in prices.
Looking ahead, analysts see reasons for concern from issues rooted in pre-pandemic times, such as social inflation, seen as a particular issue for casualty lines.
Compounding this longterm view and further countering current tailwinds is climate risk, as increasing event frequency and severity look set to continue.
