The number of property/casualty (P/C) insurers that saw their credit ratings downgraded by AM Best nearly doubled in the first half of 2023.
Why it matters: An insurance company’s creditworthiness refers to the likelihood that the company will default on its obligations. The jump in credit downgrades means more insurers are facing financial pressure.
By the numbers: In the first half of 2023, AM Best took 351 rating actions; three of every four (74.9%) were affirmations. That means the current rating is good.
What they’re saying: “U.S. property/casualty insurers continued to face heightened weather-related catastrophe activity, in addition to rising loss and reinsurance costs in the first half of 2023,” AM Best said in the report. “All lines were also impacted by worsening economic and social inflation. Some struggled to navigate the uncertain economic environment and reported deteriorating results.”
Zoom in: Personal auto insurers accounted for 11 of 21 personal lines downgrades.
In the commercial lines sector, upgrades outpaced downgrades, 13 to 10, AM Best reported.
What to watch: “P/C insurers face a number of challenges continuing into 2023. Economic inflation, despite a decline in the first half of the year, continues to drive up loss costs, and uncertainty about climate risk, secondary perils, social inflation, and rising reinsurance costs, lingers,” AM Best said.
The credit ratings firm added that personal lines insurers “that are slow to address challenges … will likely face ratings pressure.”
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