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A.M. Best & Co. Inc. said Friday it has revised its outlook for the U.S. commercial lines insurance segment from negative to stable, citing favorable COVID-19 business interruption rulings for insurers among other factors.
The relatively modest negative impact of the COVID-19 pandemic on commercial lines insurers’ financial performance in 2020 and through the third quarter of 2021 was a key driver of the change in outlook, Best said.
“In many lines, the decline in loss frequency has more than offset any increase in severity — commercial auto is the line where this pattern is most evident,” Best noted in its report.
Litigation related to denial of coverage for business interruption claims has generally been resolved in favor of insurers, with many cases dismissed without proceeding to trial, Best said.
The segment delivered better underwriting results in 2020 than in 2019 on a normalized basis.
In light of greater clarity about the impact of the pandemic, the Oldwick, New Jersey-based ratings agency also revised its market segment outlooks to stable for several key commercial lines of business, including workers compensation, commercial property and surety.
Continued strong pricing momentum across commercial lines, except for workers compensation, was another contributing factor to the change in outlook, Best said.
Best expects rates to continue to rise, but the rate of growth is likely to slow through 2022. “We expect that as exposures stabilize, commercial lines premium growth will moderate somewhat, but remain strong through 2022,” the report said.
While higher inflation could continue to pressure the price of goods and materials, the segment will have the capital to manage through any temporary increases in prices as an earnings issue, Best said.
It expects the segment will remain profitable despite near and long-term challenges.
Despite years of premium pricing increases, the commercial auto sector continues to see underwriting losses, according to a report Monday by A.M. Best & Co.