U.S. property/casualty rating downgrades more than doubled in 2018 compared to the previous year, a result stemming from factors including catastrophic weather losses and challenging pricing conditions, A.M. Best said in a new report.
At the same time, upgrades still outnumbered downgrades for a fourth consecutive year.
Downgrades had declined since 2014, but catastrophic weather losses, challenging pricing conditions in competitive lines of business, capital market volatility and other factors helped reverse this in 2018, according to the report.
As downgrades increased, positive rating actions also grew, A.M. best said, “reflecting individual company trends of positive operating performance over several years, steady growth in risk adjusted capitalization, and acquisition/affiliation with higher-rated companies and groups.”
Both refer to issuer credit ratings, which concern the ability of an entity to meet its ongoing financial obligations.
According to A.M. Best, 5.7 percent of its rating actions were downgrades in 2018 and 8.5 percent were upgrades, with 5.4 percent under review. In 2017, 2.8 percent of the actions involved downgrades and 8.5 percent were downgrades, with 5.8 percent under review.
Affirmations were 77.7 percent of the actions in 2018 compared to 80.4 percent in 2017.
A.M. Best’s full report is “U.S. Property/Casualty rating Downgrades Rise Markedly in 2018.”
Source: A.M. Best