Best Revises US Commercial Lines Property and Casualty Outlook to Stable

A.M. Best has revised its outlook for the US commercial lines property and casualty (P&C) insurance segment to stable from negative.

In announcing the changed outlook, the rating agency cited the relatively modest negative impact of the COVID-19 pandemic, continued strong pricing momentum across the segment, and favorable rulings thus far on many business interruption coverage disputes.

In a Best's Market Segment Report titled "Market Segment Outlook: U.S. Commercial Lines," Best noted that the heightened level of economic uncertainty and the potential impact of the pandemic were key factors in its decision to revise the commercial lines outlook to negative in April 2020. But the effect of the pandemic has been modest on the commercial lines segment over the past 18 months, the rating agency said, with better underwriting results in 2020 than in 2019 on a normalized basis.

In addition, litigation related to denial of coverage for business interruption claims related to the pandemic has generally been resolved in favor of insurers, Best noted.

Best said that as greater clarity has emerged around the pandemic's impact, it also has revised its market segment outlooks to stable for several commercial lines of business, including workers compensation, commercial property, and surety.

Best said it expects commercial lines rates to continue increasing, though that growth is likely to slow in 2022. While higher inflation could pressure the prices of goods and materials, the rating agency said it expects the commercial lines P&C segment will have the capital to manage through any temporary increases in prices.

Best noted that the segment does continue to face challenges, including social inflation and climate risk.

Overall, the stable outlook on the US commercial lines segment reflects Best's expectation that the segment will remain profitable, its risk-adjusted capital position will remain sound, and the segment will be resilient in the face of both near-term and longer-term challenges, the rating agency said.

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