Best Reports Fewer Property-Casualty Upgrades, More Downgrades in 2022

A.M. Best issued fewer credit rating upgrades for US property-casualty insurance companies in 2022 and more credit rating downgrades.

In a new report, "Fewer Upgrades and More Downgrades for U.S. P/C Industry in 2022," the rating agency noted that the shift occurred as insurers were confronted with higher reinsurance costs, economic and social inflation, and rising loss costs.

Best found that some insurers were able to navigate the changing economic environment and strengthen their balance sheets and operations, while others saw their results deteriorate.

The rating agency said that its US property-casualty credit rating upgrades declined to 36 or 5.1 percent of total rating actions in 2022, from 54 in 2021. Meanwhile, the number of downgrades increased to 30, 4.2 percent of rating actions, from 3.4 percent of rating actions in 2021.

Best upgraded 26 ratings and downgraded 11 in the commercial lines segment in 2022, both more favorable results than in 2021 when the segment saw 21 ratings upgraded and 13 downgraded.

The percentage of negative rating outlooks in the US property-casualty segment declined in 2022 to 5.4 percent from 8.1 percent in 2021. Positive outlooks declined as well, to 3.3 percent from 5.7 percent a year earlier, Best said.

Best said it assigned 32 ratings in 2022, with 27 in the commercial lines segment, three in the personal lines segment, and two in reinsurance. Rating affirmations made up the bulk of Best's 2022 total rating actions at 82.8 percent.

"Market trends are likely to continue impacting US personal lines insurers negatively," Helen Andersen, industry analyst at A.M. Best, said in a statement. "The commercial segment also faces headwinds but remains solidly capitalized owing to its conservative investment profile, sound reserve position, and enhanced risk management discipline."