In the past five years, more insurers in North America have had their financial strength ratings upgraded than downgraded.
However, most of the insurance segments in North America received a negative outlook for the next twelve months.
These findings were obtained by Aon's Reinsurance Solutions team, which analyzed AM Best's rating decisions over the past five years.
The brokers found that from 2016 to 2021, 72 insurance companies in North America had their financial strength ratings raised from A- to A. Of this number, 50 were upgraded based on their own merit. The other 22 firms were boosted by a merger or acquisition of another group.
Why insurers’ financial strength ratings were upgraded
By comparison, 24 companies had their ratings downgraded to A-. The Aon team notes that 56 per cent of these insurers were stock companies and 26 per cent were mutuals.
What triggered the downgrade? Deficient reserves, catastrophe losses and poor operating results are common causes. Poor operating results and enterprise risk management were the leading drivers, accounting for 68 per cent of all downgrades.
Aon also notes that the downgrades mostly impacted insurers in the personal property and commercial casualty markets.
Factors that weighed down insurers’ financial strength ratings
In Canada
AM Best also tracks the outlook for 23 insurance segments in North America, Aon notes. Eight of those segments have a stable outlook, compared with 15 segments that have a negative outlook. None have a positive outlook.
Of the 23 markets tracked by AM Best, two are in Canada and the rest are in the United States. The Canadian property and casualty insurance market has a stable outlook. In contrast, the life and health insurance market has a negative outlook.
