A recent AM Best report revealed U.S. commercial property markets are stabilizing after months of unsatisfying figures.
The changes were mainly attributed to climate change, low interest rates and the outcomes associated with the COVID-19 pandemic.
Various insurance experts ensure that the pandemic does not result in physical loss or damage to property. The figures indicate 90% of federal cases have been decided in insurers’ favor. AM Best previously described the U.S. market segment outlook as negative for the commercial property market, before upgrading it to stable Nov. 30.
The criterion for the report was strong risk-adjusted capital of segment carriers, continuing rate increases and underwriting discipline, as well as the decrease of business interruption claims and positive rulings for insurers in lawsuits. Adjustments made by businesses, such as rate actions, decreases in capacity, improvements in catastrophe models and tightening of terms and conditions also contributed to the rating. Business interruption claims initially increased rapidly due to coronavirus related business closures, according to AM Best.
Those claims led to several lawsuits against insurance companies, which could have resulted in billions of dollars in damages, had they been successful, according to AM Best. The company reports 75% of state cases, to date, have been decided in favor of the insurance companies.
"These lawsuits had the potential for billions of dollars in payouts, which would have been detrimental to the segment—a key driver of AM Best’s previously negative outlook," a press release stated.
AM Best is an international credit rating agency, news publisher and data analytics provider which focuses on the insurance industry. It is headquartered in the United States, but the company also has operations in over 100 countries including England, the Netherlands, Japan and Mexico.