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Credit rating downgrades mostly in commercial property: A.M. Best

A.M. Best

Commercial property insurers accounted for more than half the credit rating downgrades of commercial lines insurers last year, rating agency A.M. Best Co. Inc. said in a report Friday.

Rising storm frequency and severity, inflationary pressures and supply-chain factors continue to pose challenges for property insurers, Oldwick, New Jersey-based Best said.

Insurers have responded with significant rate increases and higher deductibles, among other actions, Best said.

There were 26 rating upgrades and 11 downgrades of commercial lines insurers in 2022, an improvement on 21 rating upgrades and 13 downgrades the prior year.

Workers compensation insurers accounted for a number of last year’s upgrades, due to favorable operating results and prior-year loss reserve development for the sector, Best said.

The commercial lines segment faces headwinds, but remains solidly capitalized on a risk-adjusted basis due to its conservative investment profile, sound reserve position and enhanced risk management discipline, Best said.

However, U.S. property/casualty insurers saw fewer rating upgrades and more downgrades overall last year.

There were 36 rating upgrades, down from 54 the prior year, while the sector recorded 30 rating downgrades, up from 24 in 2021.

Market volatility and high inflation pressured insurers across virtually all lines of business and personal lines insurers had a difficult year, due to higher loss costs for personal auto, heightened catastrophe losses and increased reinsurance costs, Best said.