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AM Best Ratings: P-C Insurer Upgrades, Downgrades Increase

AM Best rating actions for p-c carriers increased in the first half of 2021 with 10 upgrades and nine downgrades in the commercial lines segment and 16 upgrades and six downgrades in the personal lines segment.
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amount of am best ratings changes for p-c insurers increases

The number of credit rating upgrades and downgrades in the U.S. property-casualty insurance industry increased moderately in the first half of 2021 compared to the same period in 2020, according to an AM Best special report.

Rating actions for p-c carriers increased in the first half of 2021 to 347 compared to 332 over the same period in 2020, according to the report, “U.S. Property-Casualty Rating Activity Steady in First Half of 2021." Broken down, the report shows that upgrades increased to 7.5% compared to 5.1% over the first half of 2020.

Meanwhile 4.3% of ratings actions were downgrades, rising from 3.3% in the prior-year period. Also, nearly 80% of rating actions in the first half of 2021 were affirmations, which is consistent with most years, according to the report.

AM Best rating services assesses the creditworthiness of and reports on over 16,000 insurance companies worldwide. Credit ratings are independent, indicative and interactive, and summarize an opinion on an insurance company's ability to pay claims, debts and other financial obligations in a timely manner.

Other report highlights include:

  • AM Best assigned 21 ratings in the first half of 2021, 6.1% of total rating actions, a slight increase from the 20 assigned in the first half of 2020. Of the assigned ratings, 17 were in the commercial lines market and four were in the personal lines market.
  • There were 10 upgrades and nine downgrades in the commercial lines market in the first half of 2021, up from the first half of 2020 when there were four upgrades and five downgrades. This is indicative of the increased catastrophe losses in 2020, driven by wildfires in the West, hurricanes in the Southeast and the derecho that hit the Midwest.
  • The personal lines segment experienced 16 upgrades and six downgrades, representing a slight increase from the same period in the prior year, which had 13 upgrades and five downgrades. The personal lines segment benefited from lockdowns caused by the COVID-19 pandemic which led to a decline in frequency of losses in the automobile market due to the reduced number of drivers, according to the report.

While most of the challenges facing the U.S. p-c industry are not new, “uncertainties surrounding new COVID-19 variants and heightened inflation could put unforeseen pressure on the p-c insurers," the report notes. Further, if the cost of materials rises again and catastrophe losses are elevated in the second half of 2021, that could lead to “significantly higher loss payments for insurers."

Olivia Overman is IA content editor.

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Thursday, August 26, 2021
Personal Lines