A.M. Best Co. Inc. said Monday that it has revised its 2011 outlook on the commercial insurance industry from stable to negative, citing soft pricing, competition and a smaller loss-reserve cushion for insurers to tap.

However, Best said it is maintaining its stable outlook for the global nonlife reinsurance industry for the fifth consecutive year.

According to a briefing on the commercial, reinsurance and personal lines sectors, Best said a negative outlook on commercial insurance implies that while most of its ratings actions will be affirmations, negative rating actions will outnumber the positive ones this year.

This reflects its expectation of “continued competitive market conditions, gradual price deterioration and lower favorable loss-reserve development,” the Oldwick, N.J.-based rating agency said in the briefing.

Despite the negative outlook, “many insurers have priced rationally through the development of improved pricing tools in recent years—including better segmentation of data and enhancements in predictive modeling—and have strengthened enterprise risk management practices,” Best said.

Furthermore, extremely low interest rates have forced an emphasis on underwriting profitability for the best-performing companies and any deterioration in underwriting results will be cushioned by the segment’s strong capitalization, Best said.

Last year, in predicting a stable outlook, Best said profit margins would remain relatively solid, although less than in previous years because of slow economic growth, fewer business opportunities and weaker investment income.

For the reinsurance sector, Best said most reinsurers continue to maintain a very strong capitalization, which should enable them to withstand the soft reinsurance market that is now entering its fifth year.

While 2010 “is proving to be a reasonable underwriting in terms of underwriting performance,” reinsurers’ top line is under pressure as they continue to maintain underwriting discipline and ceding companies retain larger shares of their books of business, says the briefing.

“This discipline, however, is absolutely necessary to mitigate future underwriting losses, which inevitably will emerge form underpriced long-tail casualty classes and could be compounded by the future threat of inflation,” Best said in the briefing.

Earlier Monday in a separate report, Best said its 2011 outlook on health insurers remains negative.

All 3 reports can be found online at http://www3.ambest.com/bestweek/bestweekreports.asp?RT=sr.