AM Best maintained its stable market segment outlook for the US private insurance segment for 2021, citing the strong risk-adjusted capitalization and profitable performance of the passenger car segment, as well as the underwriting measures benefiting the homeowner segment. come.
In Best's recent Market Segment Report, "Market Segment Outlook: US Personal Lines," AM Best notes that despite rising reinsurance prices, catastrophe losses and the economic impact of COVID-19, the surpluses are the underlying risks for most personal lines. continue to support. carriers. Despite significant stock market volatility in recent years, with the largest negative turn at the height of the pandemic, most companies in this segment have maintained favorable risk-adjusted capitalization.
AM Best said it expects the private passenger car industry to continue its profitable performance through 2021, thanks to continued remote work and reduced mileage.
The rating agency's analysts also believe that the segment's performance will be supported by the improved use of technology and data analytics to strengthen underwriting, claims handling and pricing, as well as innovation in all operational phases and in risk management.
US catastrophe activity hit a new record in 2020, with Hurricane Zeta representing the 11th named storm to make landfall; an increase in wildfires, with the latest insured loss estimates for the western US at nearly $ 10 billion; the Iowa Derecho, with an estimated $ 5 billion in insured property losses; and other major wind and hail events. The 2020 wildfires could be at least as expensive as the 2017 wildfires in terms of insured losses, given the record number of fires and areas burned – including coastal areas that usually do not burn.
While AM Best expects the impact of COVID-19 to be manageable on private insurers, many carriers in the segment will still be affected and longer-term macroeconomic impacts are uncertain. AM Best said personal car writers should be aware of regulatory measures stemming from the pandemic that could affect renewals and cancellations, or possibly enforce coverage.
But insurers' focus on data analysis, price segmentation and exposure management, along with the continued use of technology and innovation, have positioned this segment to meet these market challenges, the rating agency said.
Moody & # 39; s Outlook
Moody & # 39; s Investors Service also offered a stable market outlook for personal lines for 2021, reflecting "robust underwriting results at lower claim rates, and the homeowners' cautious response to natural disasters".
Moody & # 39; s Investors Service said in its recent annual outlook that the recovering economy is also supporting the industry's stable outlook as property / accident premiums grow at about the same rate as GDP over time.
"The coronavirus pandemic has had several effects on the affairs of personal car and home owners in 2020," said Paulette Truman, vice president of Moody. “Pandemic-related business closures and shelter-in-place mandates caused a sharp drop in vehicle miles traveled in the spring of 2020, leading to a drop in car accidents. Meanwhile, homeowners' insurers have suffered above-average losses from natural disasters this year. "
Auto insurers have responded to the decline in driving by reimbursing some of their premiums to policyholders. Some airlines have recorded these actions as premium discounts, some as underwriting expenses and others as policyholder dividends. Insurers' favorable loss experience is likely to continue into 2021, even as the economy recovers, leading to increased price competition between auto carriers.
Homeowners' premiums will increase by a mid-single digit increase through 2020-21 based on the growth of prevailing policies and rising rates, Moody & # 39; s said. Homeowners' insurers have suffered above-average losses this year from hurricanes, tornadoes, severe thunderstorms, a derecho storm and wildfires. Some airlines have reported an offsetting drop in non-catastrophic losses as the coronavirus has kept people at home and has been able to detect and fix routine problems.
The most important insurance news, delivered to your inbox every working day.
Receive the trusted newsletter from the insurance industry