A new report from AM Best, a credit rating agency specialising in the insurance industry, reveals that US property and casualty (P&C) insurer rating downgrades declined to 43 in 2024, down from 55 the previous year, despite persistent challenges in the personal lines sector.
The report, titled “US Property/Casualty: Rating Upgrades Up, Downgrades Down in 2024,” identifies inflation and rising reinsurance costs as ongoing pressures affecting the industry.
Most of the 2024 downgrades were linked to insurers with significant property exposure, reflecting increased catastrophe risks, more frequent secondary peril losses, and higher reinsurance costs and retentions.
Conversely, rating upgrades climbed to 42 in 2024, up from 35 in 2023. This growth was largely driven by the commercial lines segment, which recorded 34 upgrades against just 12 downgrades.
In comparison, the segment had 21 upgrades and 15 downgrades the previous year, demonstrating improved stability.
Other notable findings from the report include an increase in initial ratings assigned by AM Best, rising to 33 in 2024 from 26 the year prior. These ratings accounted for 4.5% of all rating actions, with the majority issued in the commercial lines sector.
Personal lines insurers, however, faced a more difficult landscape, with 25.6% holding negative outlooks as of December 31, 2024—up from 17.9% a year earlier. Meanwhile, positive outlooks in this segment inched up from 1.3% to 1.8%, and the number of companies under review rose from 4.7% to 6.7%.
The most common driver of rating upgrades was operating performance, influencing 40.5% of cases. Additionally, 23.8% of upgrades resulted from insurers merging with higher-rated groups.
On the downgrade side, 34.9% stemmed from deteriorating balance sheet strength, while 27.9% were linked to weak operating performance. Another 14% of downgrades reflected adjustments across multiple rating factors, all of which included balance sheet strength.
The findings highlight a mix of resilience and ongoing financial pressures within the P/C insurance industry, with commercial lines demonstrating strength while personal lines insurers continue to face significant economic and operational hurdles.
“The underwriting performance and overall reserve development for commercial lines insurers has been consistently solid, with positive pricing momentum and underwriting discipline positioning the segment to navigate the headwinds,” said Helen Andersen, industry research analyst, AM Best.
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