Ratings Changes for P/C Insurers Up Moderately, Says AM Best

The number of credit rating upgrades and downgrades in the U.S. property/casualty (P/C) insurance industry increased in the first half of 2021 moderately over the same prior-year period, 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 during the same period in 2020, according to the report titled, “U.S. Property/Casualty Rating Activity Steady in First Half of 2021.” The report shows that upgrades increased to 7.5% of all rating actions, compared to 5.1% for the first half of 2020, while 4.3% of ratings actions were downgrades, rising from 3.3% in the prior-year period.

Nearly 80% of rating actions in the first-half of 2021 were affirmations, which AM Best said is consistent with most years.

Other results from the report:

• AM Best assigned 21 ratings in the first half of 2021 (or 6.1% of total rating actions), one more than the 20 assigned in the first half of 2020 (6.0%). Of the assigned ratings, 17 were in the commercial lines segment and four were in the personal lines segment;
• In the commercial lines segment, for the first six months of 2021, there were 10 upgrades and nine downgrades, up from the first half of 2020, when there were four upgrades and five downgrades. The commercial lines segment experienced increased catastrophe losses in 2020, driven by wildfires in the West, hurricanes in the Southeast and the derecho that hit the Midwest; and
• In the first half of 2021, the personal lines segment rating units experienced 16 upgrades and six downgrades, both representing slight increases from the first half of 2020, which had 13 upgrades and five downgrades. AM Best said the personal lines segment benefited from lockdowns caused by the COVID-19 pandemic in 2020, which led to a decline in frequency of losses in the automobile line because of the reduced number of drivers.

Most of the challenges facing the U.S. P/C industry are not new, according to the report, though carriers have been resilient in facing the challenges. AM Best said that “uncertainties surrounding new COVID variants and heightened inflation could put unforeseen pressure on the P/C insurers” and 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.”

Source: AM Best

Topics Carriers AM Best Property Casualty