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US personal lines battling rising loss cost severity: AM Best 

AM Best has maintained its negative outlook on US personal lines for next year due to the ongoing deterioration in results for personal auto and homeowners business, and with inflationary pressures driving rising loss costs. 

“Many segment carriers continue to pursue rate adequacy in response to rising loss cost severity, but their ability to stay ahead of current trends has been challenged,” AM Best Associate Director Chris Draghi said. 

The report says elevated reinsurance costs amid heightened catastrophe loss volatility and increased secondary peril activity are negative factors, while offsetting positives include risk-adjusted capitalisation levels, improved investment yields and some easing of regulatory hurdles. 

But AM Best Senior Director Richard Attanasio says the capital cushion has eroded for some insurers.  

 “Given the persistently high loss costs, as well as increased levels of net retention for homeowners carriers, a return to underwriting profitability for the segment over the near term appears highly unlikely,” he said. 

Increased loss severity for auto has been driven by higher fatality rates, increased repair costs for newer vehicles, higher used car prices, supply chain and labor market disruptions, and rising medical costs, as well as the overall inflationary environment. 

Material catastrophe-related losses have continued this year, with events including Hurricane Idalia, the Lahaina wildfires in Hawaii, California flooding, freezing winter weather in the Northeast and severe convective storms, including wind, hail and tornadoes, particularly in the Midwest and South.   

AM Best had revised its personal lines outlook to negative in September last year.