OLDWICK: Global insurance sector rating agency, AM Best is maintaining a stable market segment outlook on the U.S. personal lines insurance segment for 2021, due to the segment’s strong risk-adjusted capitalization and profitable underwriting performance in private passenger automobile, as well as underwriting actions benefiting the homeowners segment.
In its new Best’s Market Segment Report, “Market Segment Outlook: U.S. Personal Lines,” AM Best notes that despite rising reinsurance pricing, catastrophe losses and the economic impact from COVID-19, surplus levels continue to support the underlying risks for most personal lines carriers.
Despite the significant volatility in the equity markets in recent years, with the widest negative swing occurring at the peak of the pandemic, most companies in this segment have maintained favorable risk-adjusted capitalization.
AM Best expects the private passenger automobile industry to sustain its profitable performance through the remainder of 2020 and into 2021, owing to ongoing remote work and a reduced number of miles driven.
Performance will be supported by the enhanced use of technology and data analytics to strengthen underwriting, claims handling and rate-making, as well as innovation in all operational phases and in risk management.
U.S. catastrophe activity reached a new record in 2020, with Hurricane Zeta representing the 11th named storm to make landfall; an uptick in wildfires, with latest insured loss estimates for the western U.S. nearing $10 billion; the Iowa Derecho, with an estimated $5 billion in insured property losses; and other sizeable wind and hail events.
The 2020 wildfires may be at least as costly as the 2017 wildfires in terms of insured losses, given the record number of fires and acreage burnt—including coastal areas that do not usually burn.
Although AM Best expects the impact of COVID-19 to be manageable on personal lines insurers, numerous carriers in the segment still will be affected and longer-term macroeconomic influences are still uncertain.
Personal automobile writers will need to be mindful of regulatory actions resulting from the pandemic that could affect renewals and cancellations, or potentially force coverage. Insurers’ focus on data analytics, pricing segmentation and exposure management, along with the ongoing leveraging of technology and innovation have positioned this segment to withstand these market challenges.
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