Ratings analysts at A.M. Best said improved underwriting performance in the private passenger auto line of business, lower—albeit still elevated— catastrophe experience and favorable investment returns have convinced them to maintaining a stable market segment outlook for the personal lines segment of the U.S. property/casualty insurance industry in 2019.

A Best’s Market Segment Report – “Market Segment Outlook: U.S. Personal Lines” – states that while the personal lines segment’s performance improved in 2018, leading to an all-time high in policyholder surplus, competition remains intense in the auto and homeowners segments with little significant consolidation.

While significant rate activity in the last few years and relatively benign loss cost trends led to markedly improved results in the private passenger auto segment, proposed tariffs on automobiles and auto parts, as well as the continued legalization of cannabis, could negatively impact the segment in future years, the report says.

Although catastrophe losses to date are far less than those experienced in 2017, second-half 2018 loss activity has escalated. Still, A.M. Best finds that rate increases, increased pricing segmentation and favorable reinsurance pricing has mitigated the detrimental impact on carriers.

Also, although the combination of moderately higher interest rates and declining credit risk has created favorable trends in the equity markets, A.M. Best analysts caution that inflation could cause a deterioration in reserve adequacy.

The analysts see rate increases continuing, however the level of those increases likely will subside in the near term.

A.M. Best said it believes the segment as a whole must continue to focus on pricing segmentation, product development, risk management and the leveraging of technology and innovation, particularly as changing demographics and customer behavior, along with climate change, become more pressing. Companies that lack the will or resources to do so risk being left behind in an increasingly competitive market, the analysts said.

Source: A.M. Best’s Market Segment Report, “Market Segment Outlook: U.S. Personal Lines.”