Press Release - DECEMBER 10, 2018

Best’s Market Segment Report: U.S. Commercial Lines Insurance Outlook Remains Stable As Carriers Navigate Near-Term Headwinds

 Jennifer Marshall
+1 908 439-2200, ext. 5327

Christopher Sharkey
Manager, Public Relations
(908) 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
(908) 439 2200, ext. 5644


AM Best is maintaining a stable market segment outlook for the commercial lines segment of the U.S. property/casualty insurance industry in 2019, citing robust risk-adjusted capitalization, profitability in the workers’ compensation line of business, modestly improved interest rates and the benefits of U.S. tax reform. AM Best also views stable reinsurance pricing as a factor in this outlook.

A new Best’s Market Segment Report, titled, “Market Segment Outlook: U.S. Commercial Lines,” states that these favorable factors are partly counterbalanced by ongoing concerns about the health of certain liability sublines, such as financial lines, as well as the commercial auto line. Intensifying price competitiveness is another challenge the industry faces, and the commoditization of commercial insurance products, particularly for smaller accounts, will require that companies pursue a variety of ways to differentiate their products beyond price. Other factors such as climate change will require long-term solutions; however, in the near term, while recent events have bruised the segment’s earnings, the foundation on which they have been generated remains solid.

The market segment report outlines other factors that are driving the outlook, including as follows:

  • An abundance of capital is benefiting commercial lines insurers, despite higher catastrophe losses in 2017 and 2018. However, the perception of excess capital over time could drive poor underwriting decisions that will have longer-term negative ramifications;

  • The workers’ compensation line of business, the commercial segment’s largest, exhibited favorable earnings through the first three quarters of 2018. Total net premiums written also have benefited from the strong labor market, which has more than offset year-over-year rate declines;

  • After a decade of declining reinvestment rates, more companies are reporting that in the improving interest rate environment, they have achieved rate parity when investing new money. Companies with an above-average allocation to equities may see greater earnings volatility due to GAAP accounting rule changes requiring that unrealized gains and losses be recognized on the income statement; and

  • Lower tax rates due to U.S. tax reform should help improve profitability, although pressure on companies to return capital to shareholders if other beneficial uses cannot be identified could increase.

To access the full copy of this market segment report, please visit .

For a video with Michael Lagomarsino, senior director, about the U.S. commercial lines segment outlook, please visit .

To access AM Best’s market segment report on the U.S. personal lines segment outlook, please visit .

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.