US P&C insurers hit with rating downgrades

AM best doubles number of insurance companies facing rating slide

US P&C insurers hit with rating downgrades


By Terry Gangcuangco

There were more rating downgrades than upgrades on property & casualty insurers in the US in 2023, according to credit rating agency AM Best.

In AM Best’s “US Property/Casualty Downgrades Outpace Upgrades in 2023” report, it was noted that there were 55 downgrades last year – a higher total compared to upgrades (35) in 2023, as well as to the number of downgrades (30) in 2022.

Broken down, the bulk of last year’s downgrades came from the personal lines segment.

“In 2023, 39 ratings in the personal lines segment were downgraded and nine were upgraded, compared with 18 downgrades and 10 upgrades the year before,” AM Best reported. “Downgrades were driven primarily by declines in capitalization and deteriorating operating performance.

“Upgrades were due primarily to insurers being added to a different rating unit or related to lift from a parent organization, while only about 40% of upgrades were related to improvements to specific building block assessments.

“Many downgrades were due to changes in multiple building blocks, all of which included balance sheet strength. Auto carriers accounted for 24 of the downgrades, underscoring the deterioration in personal property and auto results.”

AM Best industry analyst Helen Andersen commented that market trends are expected to continue negatively impacting personal lines insurers in the US.

“Carriers that are slow to address challenges or do not have the means, expertise, or technological capabilities to keep pace with changes in the environment will likely face ratings pressure,” she said.

Meanwhile, in commercial lines last year, 21 ratings were upgraded and 15 were downgraded.

“Upgrades were due primarily to greater support from another entity, owing to either lift from a parent or being added to a different rating unit,” AM wrote in its report. “Downgrades were due primarily to weakened balance sheets and deteriorating operating performance.

“Despite some volatility over the last five years, the commercial segment has generally reported profitable underwriting results.”

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