Press Release - DECEMBER 10, 2018

Best’s Special Report: AM Best Benchmarking Analysis Shows U.S. Property/Casualty Industry Remains Strongly Capitalized

 John Andre
Managing Director
+1 908 439 2200, ext. 5619

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


An AM Best analysis of the U.S. property/casualty (P/C) industry under the rating agency’s 2017 Best’s Credit Rating Methodology (BCRM) update shows that most companies remain strongly capitalized and are able to demonstrate patterns of stability that reflect their quality of capital, asset-liability management and diverse reinsurance programs.

A new Best’s Special Report, titled, “U.S. Property/Casualty Benchmarking,” discusses the impact on rated P/C insurers from updates to BCRM and Best’s Capital Adequacy Ratio (BCAR). The assessment has generated benchmarking statistics, which are detailed in the report. According to the report, more than one-third (35%) of the rated population had the strongest category of balance sheet strength, while 48% of rated entities were assessed in the very strong category. When split between commercial and personal lines, the percentage of companies in those two categories become more than 88% of commercial writers and nearly 77% of personal lines writers. The difference is largely due to lower assessments for a few personal lines writers that specialize in nonstandard auto or are geographically concentrated for homeowners, as these companies tend to have high underwriting leverage that result in weaker balance sheets.

The primary quantitative tool used to evaluate balance sheet strength is BCAR, which helps determine whether a company’s capitalization is appropriate; however, AM Best takes all of the balance sheet components into consideration, as the BCAR itself is not the sole determinant of the balance sheet strength assessment. Still, companies with lower overall balance sheet assessments generally lack other strengths to offset lower BCAR scores.

Along with balance sheet strength, the key pillars AM Best uses in its credit analysis are operating performance, business profile and enterprise risk management. The operating performance of nearly 52% of the rated population was assessed at the baseline assessment of adequate, reflecting neutral operating trends, which can be equated to underwriting metrics near break-even. Additionally, nearly 55% of rated entities were found to have a limited business profile assessment. Among the key characteristics of these companies are a lack of geographic or product diversification, limited distribution and high competition with low barriers of entry.

“Given the number of smaller local and regional personal lines companies, niche writers, and single parent and group captives rated by AM Best, the business profile results are not outside expectations,” said John Andre, managing director.

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

For a video with AM Best Managing Director John Andre about the U.S. P/C benchmarking report, please visit .

To see the Best’s Market Segment Report Outlook on the U.S. P/C industry, please visit:

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