While credit-rating activity for the US property-casualty sector was mixed in the first half of 2020, upgrades modestly outnumbered downgrades, according to a new report from AM Best.
According to the new Best’s Special Report, titled “Mid-Year Rating Changes Mixed as US Property/Casualty Insurers Manage Challenging Market Dynamics”, the percentage of upgrades for AM Best-rated US P&C carriers’ Issuer Credit Ratings through H1 of 2020 were down slightly, to 5.1% of rating actions from 6.2% in H1 2019. About 25% of the 17 upgrades in H1 2020 were due to affiliations or mergers. Downgrades decreased to 3.3% of total actions, from 7.1% in the first half of 2019.
“Affirmations were the most common action, at 81.3%, reflecting the overall stability of the US P/C industry,” AM Best said.
Rating upgrades were driven largely by increases in risk-adjusted capitalization, strong results relative to operating performance and the appropriateness of companies’ enterprise risk management, AM Best said. While COVID-19-related lockdowns have forced many companies to transition to remote work, most have operated effectively in the remote environment.
Other report highlights included:
“The US P/C industry continues to face challenges, including elevated non-weather related water losses; catastrophic weather activity; uncertainty regarding the long-term effects of COVID-19; and system implementations,” AM Best said. “AM Best maintains a stable market segment outlook on the personal lines segment of the P/C industry and the global reinsurance industry, and a negative outlook on the commercial lines segment, reflecting the macroeconomic fallout from COVID-19.”