A.M. Best Maintains Stable Outlook on US Commercial Lines Segment

A.M. Best is maintaining its stable market outlook for the US commercial insurance lines segment for 2024.

The rating agency said its stable outlook is due in part to the US commercial lines segment's persistently strong underwriting results throughout the pandemic and amid significant economic and capital markets volatility.

In the aggregate, admitted commercial lines insurers remain disciplined about risk selection, terms and conditions, and capacity deployment, Best said in a new Best's Market Segment Report, titled "Market Segment Outlook: U.S. Commercial Lines." The December 5, 2023, report cites further evidence for its outlook in continued strong submission flow and growth in the nonadmitted/excess and surplus lines market.

In addition, insurers have seen sharply higher fixed-income reinvestment rates beginning to significantly improve their operating profitability across almost all commercial insurance lines, especially longer-tailed casualty, Best said.

"Pricing momentum remains positive for most classes of business, with the notable exception of workers compensation and certain management liability classes," Alan Murray, associate director at A.M. Best, said in a statement.

The Best report said that US commercial lines insurers' reserve development from prior period exposures is expected to be favorable overall, though at lower levels than in recent years. Reserve development from prior period exposures will vary widely by line of business, however, Best said.

The rating agency cited several near-term concerns that could affect the US commercial lines segment. Economic inflation is the chief concern, Best said, in addition to social inflation, including jury awards and litigation costs that continue to rise, affecting loss costs in casualty lines. Domestic and geopolitical risks, including congressional gridlock, were also noted as factors that could heighten commercial and economic risks relevant to US property-casualty commercial lines insurers.

"The stable outlook on the US commercial lines segment reflects A.M. Best's expectation that the segment will remain profitable in aggregate and will be resilient in the face of near- and longer-term challenges," the Best statement said. "It also reflects that the risk-adjusted capital for the majority of segment [insurers] will remain sound. In addition, the outlook reflects the stable outlooks on the commercial property and workers compensation lines, as well as the positive outlook for the excess and surplus lines market."

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