Best’s Market Segment Report: AM Best Maintains Negative Outlook on U.S. Personal Lines Insurance Segment

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best is maintaining its negative market segment outlook on the U.S. personal lines insurance segment for 2024, citing the ongoing deterioration in results for the personal auto and homeowners’ lines of business, along with rising loss costs that are being driven by inflationary pressures.

AM Best had revised its personal lines outlook to negative in September 2022, and this opinion heading into 2024 remains unchanged, according to its new Best’s Market Segment Report, “Market Segment Outlook: U.S. Personal Lines.” The report also notes the challenges that personal lines writers have in maintaining rate adequacy and cites elevated reinsurance costs amid heightened catastrophe loss volatility and increased secondary peril activity.

Factors offsetting the negative pressures include solid levels of risk-adjusted capitalization for insurers within the segment with sufficient liquidity. Additionally, improving investment yields and an overall push for rate adequacy with some easing of regulatory hurdles have also contributed positively, according to the report.

“However, the capital cushion has eroded for some insurers,” said Richard Attanasio, senior director, AM Best. “Given the persistently high loss costs, as well as increased levels of net retention for homeowners carriers, a return to underwriting profitability for the segment over the near term appears highly unlikely.”

“Many segment carriers continue to pursue rate adequacy in response to rising loss cost severity, but their ability to stay ahead of current trends has been challenged,” said Chris Draghi, associate director, AM Best.

The increase in loss severity for auto has been driven by higher fatality rates, increased repair costs for newer vehicles, higher used car prices, supply chain and labor market disruptions, and rising medical costs, not to mention the overall inflationary environment.

The personal lines segment remains susceptible to an ongoing trend of material catastrophe-related losses in recent years, which continued in 2023. Hurricane Idalia, the Lahaina wildfire disaster in Hawaii, California flooding, freezing winter weather in the Northeast, and severe convective storms (including wind, hail, and tornadoes, particularly in the Midwest and South) produced significant losses.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=338268.

To view a video with AM Best Associate Director Chris Draghi about the U.S. personal lines market segment outlook, please visit http://www.ambest.com/v.asp?v=outlookpersonallines1223.

Leading AM Best analysts will review 2023 market segment outlooks for the U.S. insurance industry’s major segments, the global reinsurance industry and the delegated underwriting authority enterprises (DUAE) segment in an online briefing scheduled for Tuesday, Dec. 12, 2023, at 2 p.m. (EST). To register for the complimentary briefing, please go to http://www.ambest.com/conference/USMB2024.

To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Richard Attanasio
Senior Director

+1 908 882 1638

richard.attanasio@ambest.com

Chris Draghi
Associate Director

+1 908 882 1749

chris.draghi@ambest.com

Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

Source: AM Best