AM Best maintains Stable outlook on US commercial lines insurance segment

Global credit ratings agency AM Best has confirmed that it is maintaining its stable market segment outlook on the US commercial lines insurance for 2024, which is supported by the segment’s persistently strong underwriting results throughout the pandemic, as well as amid substantial economic and capital markets volatility.

According to the agency, admitted commercial lines carriers in aggregate remain disciplined about risk selection, terms and conditions, and capacity deployment.

Moreover, Best also highlights further evidence in the form of continued strong submission flow and growth in the non-admitted/excess and surplus lines (E&S) market.

The agency also noted that “sharply higher” fixed-income re-investment rates have begun to significantly bolster operating profitability across virtually all commercial lines, especially within longer-tailed casualty.

Alan Murray, associate director, AM Best, commented: “Pricing momentum remains positive for most classes of business, with the notable exception of workers’ compensation and certain management liability classes.”

Another key factor to highlight, is that reserve development from prior period exposures is expected to be favorable overall for commercial lines, but at lower levels than in the past few years.

However, Best states that expected reserve development from prior period exposures will vary widely by line of business.

Further, the agency is also citing a number of near-term concerns that could wind up impacting the US commercial lines segment.

The main one among them is the fact that economic inflation remains “stubbornly elevated”, despite central bank actions to moderate.

At the same time, social inflation, including jury awards and litigation costs, are continuing to rise, which as a result is affecting loss costs in the casualty lines of business.

Both domestic and geopolitical risks, including congressional gridlock, are noted by Best as factors that have the potential to sharply heighten commercial and economic risks relevant to the US P&C commercial lines segment.

Lastly, Best noted that the stable outlook on the US commercial lines segment reflects their expectation that the segment will remain profitable in aggregate and will also be resilient in the face of near- and longer-term challenges.

The outlook also reflects the stable outlooks on the commercial property and workers’ compensation lines, as well as the positive outlook for the excess & surplus lines market.

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