2017 - Multicolor Concept on Dark Brick Wall Background with Doodle Icons Around. Modern Illustration with Elements of Doodle Design Style. 2017 on Dark Wall. 2017 Concept. 2017.The commercial lines segment won’t be able to shake the negative outlook A.M. Best assigned it anytime soon. The ratings agency said it will keep that assessment the same heading into 2017, because it expects factors including more intense price competition and stubbornly low investment yields to contribute to market deterioration.

“The segment is being impacted by intensifying price competition in most lines, decreasing levels of favorable development of prior years’ loss reserves and persistently low investment yields, as well as a return to a more historically normal level of catastrophe losses,” A.M. Best explained in its briefing on the sector.

A.M. Best’s forecast echoes market predictions made earlier in 2016 by Fitch and others.

Some of A.M. Best’s assessment highlights:

  • The commercial lines sector remains “strongly capitalized” but this trend is spurring the competitive pricing.
  • Worsening price competition has permeated almost all of the commercial lines sector, “particularly for the business of medium and large insureds, placing top line pressure on most companies.”
  • Companies can get through the continued downturn with advanced analytics and enhanced data that enable a more precise process of choosing/pricing business and managing claims.
  • Workers compensation and general liability rates are still under pressure. Most property lines are still getting hit with rate reduction.
  • Commercial auto rate adequacy is a moving target due to worsening accident frequency and severity, even though rates are still increasing.
  • Pressure on underwriting margins will likely squeeze operating results.

Source: A.M. Best