Best’s Market Segment Report: AM Best Maintains Stable Outlook on U.S. Commercial Lines Insurance Segment

AM Best is maintaining its stable market segment outlook on the U.S. commercial lines insurance sector for 2025, due partly to its persistently strong underwriting performance and improved investment returns, which have bolstered operating profitability.

Reserve adequacy in the commercial lines segment has been sustained, although it has varied by line of business, and insurers have maintained discipline regarding risk selection, terms and conditions, and capacity deployment. However, near term concerns for this segment include elevated casualty claims that reflect the multi-year impact of social inflation with adverse implications for underwriting and reserve margins. Additional headwinds include relatively high property claims costs, in addition to domestic and geopolitical risks following the U.S. presidential election.

“Our expectation is that the U.S. commercial lines segment will remain profitable in the aggregate and will be resilient in the face of near- and longer-term challenges,” said Alan Murray, director, AM Best.

The Best’s Market Segment Report also notes that the majority of commercial lines insurers will continue to have sound levels of risk-adjusted capitalization. U.S. commercial lines insurers overall generated favorable underwriting results through the third quarter of 2024, which were evident by combined ratios averaging in the mid-90 range in the past three years, and are expected to continue to do so, driven by moderate pricing gains in most lines of business, as well as growth in net premiums written due to the U.S. economy.

Premium growth rates for commercial property have declined to the high single-digit percentages in 2024 from the high teens in 2023, in large part reflecting stabilized reinsurance markets and renewals. The impact of Hurricanes Helene and Milton in the third and fourth quarters of 2024 will likely ensure continued firmness in reinsurance renewal pricing and terms in 2025—but are unlikely to prompt the shock renewal adjustments of 2023. “With property reinsurance expected to remain relatively stable in 2025, non-life reinsurers have diverted much of their focus to casualty renewals,” Murray said.

Many reinsurers have indicated diminished appetite in a number of general liability and auto lines. Concerns about social inflation trends in U.S. casualty—and to some degree even globally—continue to rise. Reinsurers will likely become more selective with their casualty books, which may result in more hardening.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=349213.

To view a video with AM Best Director Alan Murray about the market segment outlook for the U.S. property/casualty commercial lines segment, please visit http://www.ambest.com/v.asp?v=outlookpcc1124.

Leading AM Best analysts will review 2025 market segment outlooks for the U.S. insurance industry’s major segments, the global reinsurance industry and the delegated underwriting authority enterprises (DUAE) segment in an online briefing scheduled for Tuesday, Dec. 10, 2024, at 10 a.m. (EST). To register for the complimentary briefing, please go to http://www.ambest.com/conference/USMB2025.

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.

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