US commercial lines outlook negative due to COVID-19 impact
AM Best has revised its market segment outlook on the US commercial lines industry to negative from stable, owing to the impact of COVID-19 pandemic and the ensuing economic slowdown.
The agency does not expect significant claims activity in commercial lines owing directly to the pandemic, although increased virus-related losses are expected in the event cancellation and travel insurance lines.
It stated that the rapid deterioration of the economy, with unemployment claims skyrocketing and more than 90 percent of the nation’s population under stay-at-home orders, will be felt throughout the commercial insurance segment.
Legislators in several US states have drafted legislation that would require insurers to cover business interruption losses related to physical distancing guidelines or government-mandated closures of non-essential businesses.
AM Best does expect an adverse effect on companies’ underwriting results, as expenses are unlikely to decline as rapidly as premiums. However, it noted that the longer-term potential for the economy may still be in doubt. AM Best expects that unemployment and GDP will remain challenged through 2020.
Despite the uncertainty created by the COVID-19 outbreak, AM Best is keeping its stable outlook on the personal lines segment due to reduced catastrophe activity that it says is benefiting the homeowners segment, profitable underwriting performance in the private passenger auto line of business, increased data analytics supporting underwriting and pricing decisions, and strong risk-adjusted capital positions among personal lines carriers.
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