OLDWICK, N.J., November 30, 2021--(BUSINESS WIRE)--AM Best has revised its market segment outlook to stable from negative for the U.S. commercial property market, according to a new AM Best report.
The Best’s Market Segment Report, titled, "Market Segment Outlook: U.S. Commercial Property," states that the revision is based on the following factors:
Strong risk-adjusted capital of segment carriers;
Ongoing rate increases and underwriting discipline;
The decline in business interruption claims, in addition to favorable rulings for insurers in lawsuits to date.
Factors such as climate change, the low interest rate environment and lingering uncertainty about the long-term impact of the COVID-19 pandemic continue to pose challenges for the segment. However, the segment’s carriers have adapted with rate actions, capacity reductions, improvements in catastrophe models and tightened terms and conditions.
At the onset of the COVID-19 pandemic, businesses shut down and remained closed for months due to government mandates. As a result, business interruption claims from business owners claiming loss of income due to long closures spiked. The majority of these claims were denied by primary insurers, which led to scores of lawsuits alleging physical losses and asking courts to make insurance companies pay these claims.
These lawsuits had the potential for billions of dollars in payouts, which would have been detrimental to the segment—a key driver of AM Best’s previously negative outlook. However, in the majority of cases to date, insurers have argued successfully that COVID-19 does not result in physical loss or damage to property. According to some estimates, 90% of federal cases have been decided in insurers’ favor, compared with 75% of state court cases.
To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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