The U.S. commercial lines segment gets to keep its A.M. Best stable outlook, based on a variety of market conditions and government actions that have left it in mostly solid shape.

Healthy risk-adjusted capitalization (even with higher catastrophe losses for 2018), workers compensation profitability, improving interest rates, benefits from the Trump tax cuts and a stable reinsurance market all contributed to the ratings agency’s decision, it said in a new Market Segment Outlook.

But even as A.M. Best keeps its stable outlook for commercial insurance, it remains cautious about a number of things.

Growing pressures on pricing are drawing A.M. Best’s attention, as is the health of other commercial liability sublines such as financial and commercial auto. A.M. Best said its stable outlook is also based on the assumption, which may not be realized, that future catastrophe losses will return to historical averages and that new underwriting and claims technology will continue to be implemented.

A.M. Best noted it is also worried that “the perception of excess capital could drive poor underwriting decisions that will have long-term negative ramifications for the segment’s health.”

For now, though, there is stability. A.M. Best said that 2018 will follow a similar pattern to 2017, where the much-higher-than-expected 2017 catastrophe losses were largely contained “within annual earnings for the industry in general, and the segment continued to add to its surplus position, with additional benefit from investments.”

A.M. Best’s full report is “Market Segment Outlook: U.S. Commercial Lines.”

Source: A.M. Best