Best’s Market Segment Report: AM Best Places Stable Outlook on U.S. Personal Lines Insurance Segment

AM Best has revised its outlook to stable from negative for the U.S. personal lines insurance segment for 2025, which corresponds with a change to the personal auto outlook. The shift in the personal lines segment outlook cites improved rate and pricing conditions, particularly in the auto insurance space, along with solid levels of risk-adjusted capitalization among carriers.

The Best’s Market Segment Report also notes more accommodating treatment from regulators on rate requests, rising investments yields and the accelerated adoption of technology among carriers. Offsetting factors include ongoing volatility in reported results for insurers, particularly in the homeowners’ line of business. Additional headwinds include elevated loss cost severity owing to inflation and more expensive parts in newer vehicles, heightened severe weather activity and higher reinsurance costs along with tightened terms and conditions.

Personal lines carriers were met with multiple challenges after the onset of the COVID-19 pandemic in 2020 significantly increasing loss costs. Factors contributing to higher costs include the economic impact of inflation in various areas (repair parts, labor, medical costs), supply chain disruptions, higher incidence of fatalities/severe injuries and elevated jury awards in litigated claims.

“Carriers recognized the need to respond by aggressively pushing for higher rates to better account for these more volatile trends,” said Christopher Draghi, director, AM Best. “Large rate increases have been achieved over the last two years, appearing to get to a more adequate position, particularly within personal auto.”

Over the past few years, U.S. personal lines carriers have dealt with considerable disruption. Throughout this turbulent period, many carriers persevered despite escalating losses and remained nimble as they implemented corrective actions. While not all fared well, with a number of ratings downgrades occurring and weaknesses for some exposed, the segment overall maintained solid risk-adjusted capitalization. Still, the capital cushion for some companies eroded materially due to sizable operating losses, elevated reserves related to inflationary factors, changes to reinsurance protections, or a combination of all three.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=349208.

To view a video with AM Best Director Christopher Draghi about the U.S. personal lines market segment outlook, please visit http://www.ambest.com/v.asp?v=outlookpersonallines1124.

Leading AM Best analysts will review 2023 market segment outlooks for the U.S. insurance industry’s major segments, the global reinsurance industry and the delegated underwriting authority enterprises (DUAE) segment in an online briefing scheduled for Tuesday, Dec. 12, 2023, at 2 p.m. (EST). To register for the complimentary briefing, please go to http://www.ambest.com/conference/USMB2024.

To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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