Commercial property insurers can push rate past inflation: AM Best

US commercial property insurers have priced their way past the vast array of inflation threats to date, sufficient to maintain their ‘stable’ outlook from the  AM Best ratings agency.

“AM Best expects segment carriers will remain diligent in overall pricing and underwriting actions throughout 2023 to combat ongoing uncertainties over loss costs and to ensure rate adequacy,” analysts said of outlook.

AM Best likes the look of the “significant rate actions,” focus on insurance to value adjustments, tightened T&C, increased deductibles and wariness with capacity with which insurers have responded to date.

The array of inflation threats has been both broad and, in parts, severe, the agency noted, citing construction and material costs, construction labour and reinsurance for the segment.

The reinsurance side of that equation will not likely abate, analysts warned.

“AM Best expects that the property catastrophe reinsurance market will maintain its focus on pricing, higher attachment points, as well as terms and conditions, as reinsurers further re-evaluate their portfolios and risk tolerance appetites,” analysts wrote.

Trends in pandemic-era business interruption cases have proven reassuring as courts have largely concurred with carriers that the lack of physical damage to property precluded damage claims.

Climate risks to frequency and severity are on the rise, but AM Best appears to like the reaction on insured values, deductibles and limit. Models are increasingly capturing the threat from so-called secondary perils.

Risk-adjusted capitalisation levels as well as liquidity measures are called “strong,” offering confidence the carriers can absorb any near-term volatility, AM Best added.

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