In September of last year AM Best gave its first negative outlook for personal lines. The September of 2022 decision was because of issues with auto insurance. This year, AM Best said the homeowners insurance industry is in the same boat. Last week the ratings firm confirmed the negative outlook for both lines.
And the Best report says the negative rating will not change anytime soon.
“A return to underwriting profitability for the segment over the near term appears highly unlikely,” AM Best said and noted that most are well-capitalized but some of that has eroded because of underwriting losses.
AM Best also said that insurers are seriously hampered because of an inability to increase rates. Regulatory agencies in multiple states are a big part of the problem.
“Before the heightened inflationary pressures, carriers were generally able to address rate needs with modest rate increases,” AM Best said in the report. “However, as the magnitude of increases grew in line with trends in the broader economy, companies accelerates both the frequency and the degree of rate filings.”
For auto insurers the negative rating came from high repair costs, medical costs that are skyrocketing, and there are parts and labor shortages. For homeowners, disasters like wildfires, hurricanes, flooding are increasing.
“In some cases, the challenging environment has exposed weaknesses in insurers’ enterprise risk management,” AM Best said.
Source link: Insurance Journal — https://bit.ly/3TbesHR