Best Says US Property-Casualty First-Half Downgrades Outpace Upgrades

The US property-casualty insurance industry experienced an increase in credit rating downgrades during the first half of 2023, reflecting a difficult period for the personal lines segment, according to A.M. Best.

In a new report, the rating agency reported that the number of property-casualty downgrades outpaced upgrades during this year's first 6 months. Among life and health insurance companies, upgrades and downgrades were evenly split during the period.

Rating downgrades for US property-casualty insurers went from 5.2 percent of rating actions during the first half of 2022 to 9.1 percent during this year's first half, Best said. "The development comes as this segment continued to face heightened weather-related catastrophe activity, in addition to rising loss and reinsurance costs in the first half of 2023," a Best statement said.

All lines of property-casualty business were also affected by worsening economic and social inflation, Best said. The number of property-casualty ratings placed under review by the rating agency more than doubled in the first half of 2023, accounting for 6.3 percent of total rating actions.

Among US life/annuity and health insurers, Best noted in a separate report that rating affirmations accounted for a larger proportion of rating actions, as upgrades and downgrades in the segment both decreased. The rating agency said balance sheet changes drove the majority of rating changes in the group, underscoring the importance of capitalization.

Best suggested that health insurers face a possible increase in utilization, and the resumption of Medicaid eligibility redeterminations could pose issues with regard to enrollment levels and revenue and earning diversification.

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