This year should see more negative rating actions than positive ones due in large part to the likelihood of insurers taking reserve charges, says A.M. Best.
The ratings agency has held a negative outlook on the commercial-lines sector since 2011, and says in a recent briefing that it is maintaining that outlook for 2014. It says its findings reflect the continued concerns for those commercial-lines insurers that have yet to recognize loss-reserve deficiencies in their balance sheets and for those likely to take reserve charges during upswings in the market cycle.
Commercial insurers' balance sheets appear capable of absorbing shortfalls in prior-year reserves, says Best, but the ratings agency believes some insurers may run into larger problems if the reserve shortfalls prove too wide and difficult to overcome.
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