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Cat losses, pricing cited for spike in property/casualty downgrades: Best

Posted On: Mar. 6, 2019 11:23 AM CST

A.M. Best property/casualty report

A.M. Best Co. Inc. said on Wednesday the number of U.S. property/casualty insurer credit rating downgrades more than doubled in 2018, citing catastrophic weather losses and challenging pricing conditions.

There were 43 rating downgrades of property/casualty insurers in 2018, up from 20 downgrades in 2017, reversing a four-year trend of annual declines, the rating agency said in its report U.S. Property/Casualty Rating Downgrades Rise Markedly in 2018.

By segment, commercial lines recorded 33 upgrades compared with 19 downgrades in 2018, while in personal lines there were 30 upgrades compared with 22 downgrades.

Despite the increased number of downgrades, Best said it views the U.S. property/casualty industry’s ratings as stable as the industry maintains solid capitalization relative to its existing ratings.

However, major events, including Hurricane Michael and the California wildfires, had a negative impact on industry profitability in 2018, and some property insurers with significant concentration and limited scale will face pressure from these losses, Best said.

Despite the impact of catastrophes in 2018 and 2017, most companies effectively managed this exposure through favorable risk management efforts and robust reinsurance programs, Best said.

Overall the property/casualty industry experienced favorable rating changes in 2018, with 64 upgrades, up from 61 upgrades in 2017.

Nearly 85% of the rating actions were affirmations and upgrades, reflecting the industry’s continued strong capitalization, increasing pricing sophistication, and positive operating results, Best said.

Some 79.8% of the property/casualty industry’s credit ratings carried a stable outlook in 2018, a slight increase on 2017, according to the report.

The number of ratings placed under review in 2018 essentially held steady at 41, compared with 42 in 2017, Best said in the report.