Rating downgrades on US P&C insurers outpace upgrades in 2023: AM Best

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According to AM Best, credit rating downgrades on US property & casualty (P&C) insurance companies climbed to 55 in 2023, compared with 30 in 2022, given the challenging conditions in the personal lines segment.

The rating agency explained that throughout 2023, P&C insurers continued to witness higher reinsurance costs, worsening economic and social inflation and rising loss costs.

As a result of these obstacles, many struggled to navigate the uncertain economic environment and reported deteriorating results.

From what we understand, the rating downgrades represented 7.4% of all AM Best rating actions in 2023, up from 4.2% in 2022.

At the same time, the number of ratings placed under review increased substantially and accounted for 5.5% of all rating actions, most with negative implications.

However, rating upgrades declined slightly year over year by one to 35 in 2023, while affirmations continued to account for the bulk of rating actions, at 78.9%, Best noted.

Interestingly, Best also assigned 25 initial ratings to P&C carriers across 2023. Of the assigned ratings, 19 were in the commercial lines segment and five were in the personal lines segment, whilst one was a reinsurer.

In addition, across 2023, 39 ratings in the personal lines segment were downgraded, while nine were upgraded, compared with 18 downgrades and 10 upgrades seen the year before.

As well as this, the commercial lines segment saw 21 ratings upgraded and 15 downgraded in the year, compared to 26 upgrades and 11 downgrades seen in 2022.

Helen Andersen, industry analyst, AM Best, commented: “Declines in capitalization and deteriorating operating performance drove the rating downgrades in the personal lines segment. AM Best expects market trends to continue to have a negative impact on the U.S. personal lines insurers. Carriers that are slow to address challenges or do not have the means, expertise or technological capabilities to keep pace with changes in the environment will likely face ratings pressure.”

The post Rating downgrades on US P&C insurers outpace upgrades in 2023: AM Best appeared first on ReinsuranceNe.ws.

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