In the first half of 2025, US property/casualty (P&C) insurers saw a slight increase in issuer credit rating upgrades, rising to 18 from 16 in the same period a year earlier, while downgrades remained steady at 20, according to a recent AM Best special report.
By line of business, five ratings in the personal lines segment were upgraded and 13 downgraded, compared with six upgrades and 13 downgrades in H1’24.
In commercial lines, 13 were upgraded and seven downgraded, versus 10 upgrades and seven downgrades a year earlier.
Most 2025 downgrades affected carriers in the homeowners or personal property segments, reflecting heightened catastrophe losses, more frequent and severe secondary perils, and higher reinsurance costs and retentions.
Nearly a third (30%) of downgrades were driven by poor operating performance, as outsized losses from weather and inflation caused volatility in results over the past few years.
The primary driver of P&C rating upgrades was a change in rating unit composition, such as an insurer merging with a higher-rated group, accounting for 44.4% of upgrades. Improved operating performance was the next most common driver, accounting for a third of upgrades.
The report noted that rating affirmations were the most common action taken across all segments, comprising 80% of rating actions on P&C insurers in H1’25, totalling 261.
AM Best assigned 17 initial ratings, accounting for 5.2% of rating actions, compared with 15 a year earlier, with most in the commercial lines segment.
Half as many ratings were placed Under Review compared with H1’24, decreasing from 20 to 10, due to less M&A activity and a reduced impact from catastrophes, despite elevated wildfire activity early in the year.
Overall, the total number of rating actions declined slightly from 337 to 326.
AM Best noted that carriers across the industry continue to experience the impact of inflation and rising reinsurance costs.
Helen Andersen, industry analyst, AM Best, said, “In recent years, personal lines’ writers, especially homeowners’ insurers, have also had to contend with high catastrophe losses and more severe secondary perils, with higher reinsurance costs and attachment points adding to the burden.”
Meanwhile, commercial lines carriers have been well-positioned to navigate headwinds such as economic and social inflation by consistently reporting solid underwriting performance and reserve development, as well as positive pricing momentum and underwriting discipline.
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