According to AM Best's new Best's Market Segment Report, "Market Segment Outlook: U.S. Personal Lines," the segment is well-positioned to manage the challenges of 2021, which has seen above-average catastrophe activity, a return to pre-pandemic frequency trends, and increased loss cost severity. According to the report, risk-adjusted capitalization levels will remain strong in 2022, with positive cash flows and favorable liquidity supporting the position.
Rate actions in the homeowners segment resumed in late 2020 and continued into 2021, which was required because catastrophe activity remained above average in 2021. Carriers were able to limit the impact of catastrophe losses in 2021 by combining various underwriting actions. Secondary perils, on the other hand, have become equally problematic, and given the escalating challenges of climate risk, personal lines insurers are preparing for a greater number of potentially worse catastrophe events in the face of higher reinsurance pricing.
During the pandemic, there was a significant increase in technology initiatives to improve personal lines insurers' underwriting and pricing tools. Insurers are seeing an increase in the frequency of auto claims, as well as an increase in the severity of those claims, at the same time that the industry is dealing with major supply chain disruptions and higher inflation, which are driving up the cost of materials and parts. Given these pressures, creative use of technology and data analytics to improve underwriting, claims handling, and ratemaking remains critical to meeting profitability targets.
AM Best anticipates that companies in the personal lines segment in the United States will continue to respond appropriately to market challenges; however, if risks fall materially short of current expectations, the outlook may be revised.
Please visit http://www3.ambest.com/bestweek/purchase.asp?record code=315092 to obtain a full copy of this market segment report.
To watch a video with AM Best Managing Director John Andre discussing the outlook for the U.S. personal lines market segment, go to http://www.ambest.com/v.asp?v=ambpcploutlook1221.
AM's leader In an online briefing scheduled for Thursday, December 9, 2021 at 2:00 p.m. EST, Best analysts will review 2022 market segment outlooks for the major segments of the US insurance industry and the global reinsurance industry. Please visit www.ambest.com/conferences/USMB2022 to register for the briefing.