AM Best maintains U.S. personal lines insurance market outlook at stable

NEW YORK: AM Best has maintained a market segment outlook of stable on the U.S. personal lines industry for 2020, citing a significant decline in catastrophe activity, profitable underwriting performance in the private passenger auto segment and the sector’s overall strong risk-adjusted capitalization levels.

A new Best’s Market Segment Report, titled, “Market Segment Outlook: U.S. Personal Lines,” states that following record-breaking catastrophe activity in 2017 and above-average storm losses in 2018, the personal lines industry had a breather in 2019 despite threats from numerous storms. Notably, the decline in catastrophe activity has benefited the homeowners segment.

Underwriting actions taken by management teams—through enhanced pricing segmentation, rate increases to match risks and overall improved exposure and concentration management—have also better positioned the segment for continued success.

Results for the private passenger auto segment continue to benefit from a stabilization in loss cost trends and underwriting initiatives focused on rate adequacy. While ongoing severity trends are likely to remain elevated given medical severity and high costs for auto repairs, the reduction in frequency has resulted in a general flattening of rates. This could be short-lived, however, as frequency patterns can change quickly.

The report outlines other factors that are driving the stable market segment outlook, including:

Insurtech in the auto market will continue to gain traction, with enhanced sensors collecting more data that can be used in predictive analytics, underwriting decisions, claims reporting and overall pricing of risks;

A significant increase in unrealized capital gains, combined with underwriting profitability and favorable investment returns, allowed surplus to reach record levels in 2019; and

The increased focus on data analytics, pricing segmentation, exposure management and ongoing leveraging of technology and innovation will better position companies to face market pressures and changing customer demand.

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