For the first time in seven years, A.M. Best has boosted its outlook for U.S. commercial lines from negative to stable for 2018. A.M. Best attributed the improved outlook to the industry’s increased sophistication in pricing and underwriting infrastructure, despite challenging macroeconomic factors. In support of continued technology investments, A.M. Best cited the segment adopting “tools that allow for greater insight into business profitability” as a driver of better performance.
For 2017, A.M. Best anticipates an underwriting loss offset by investment income resulting in record industry earnings. Even though CAT losses were nearly twice 2016 levels, the impact was manageable due to improvements in risk management, underwriting, and pricing.
Despite the positive news, A.M Best cites the following headwinds for 2018: bond reinvestment rates lower than maturing, elevated capital levels leading to continued competitive pressures, and declining amounts of favorable prior-year development.
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