Best’s Special Report: Rating Downgrades in US Property/Casualty Insurance Segment Outpace Upgrades in 2023

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OLDWICK - MARCH 11, 2024 09:23 AM (EDT)
Credit Rating (rating) downgrades on U.S. property/casualty insurance companies rose to 55 in 2023 compared with 30 in the previous year given the challenging conditions in the personal lines segment, according to a new AM Best special report.

The Best’s Special Report, titled, “US Property/Casualty Downgrades Outpace Upgrades in 2023,” notes that property/casualty insurers continued to face higher reinsurance costs, worsening economic and social inflation and rising loss costs in 2023. Many struggled to navigate the uncertain economic environment and reported deteriorating results. The rating downgrades represented 7.4% of all AM Best rating actions in 2023, up from 4.2% in 2022. The number of ratings placed under review increased significantly and accounted for 5.5% of all rating actions, most with negative implications. Rating upgrades declined marginally year over year by one to 35 in 2023, while affirmations continued to account for the bulk of rating actions, at 78.9%.

“Declines in capitalization and deteriorating operating performance drove the rating downgrades in the personal lines segment,” said Helen Andersen, industry analyst, AM Best. “AM Best expects market trends to continue to have a negative impact on the U.S. personal lines insurers. Carriers that are slow to address challenges or do not have the means, expertise or technological capabilities to keep pace with changes in the environment will likely face ratings pressure.”

Other highlights from the report include:

• AM Best assigned 25 initial ratings to property/casualty carriers in 2023, 3.4% of rating actions. Of the assigned ratings, 19 were in the commercial lines segment and five were in the personal lines segment; one was a reinsurer;


•  In 2023, 39 ratings in the personal lines segment were downgraded and nine were upgraded, compared with 18 downgrades and 10 upgrades the year before; and


• The commercial lines segment saw 21 ratings upgraded and 15 downgraded, versus 26 upgrades and 11 downgrades in 2022.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=341112.

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.