This report examines 263 rating actions undertaken by AM Best in the period 1/1/24 to 3/31/25. The term 'rating action' is defined as anything other than affirming the existing rating with a stable outlook — including downgrades, upgrades and both improving and worsening outlooks. We exclude new rating assignments (of which there were 40 in 2024-25) as these cannot indicate any change in financial situation.
Executive summary
Negative rating actions by AM Best in the US property and casualty market outweighed positive actions in 2024-25 — continuing a trend from 2022-23. There were upticks in the proportions of negative outlooks and ratings withdrawals compared to the prior period.
Partially offsetting this, rating downgrades accounted for a smaller proportion of AM Best's actions in 2024-25. Some companies became better aligned with the agency's assessments following a rash of downgrades and increased withdrawals in 2023.
Nevertheless, P&C insurers face ongoing financial challenges. These include a persisting threat from catastrophe loss volatility and secondary perils, higher required retentions and inflationary impact on loss cost severity. AM Best also remains concerned with uncertainties surrounding tariffs and the potential impact on investment returns, reserves, rate adequacy and the strength of surplus.
Personal lines companies continue to experience a greater percentage of surplus erosion and downgrades than commercial lines writers.
Combined ratios improved by nine points in 2024 among personal lines companies that incurred negative rating action. The fact that improvements in their finances did not insulate these carriers from negative actions reflects AM Best's ongoing concerns over diminished capital strength and lagging performance relative to expectations. Commitment to pricing adequacy and exposure management are critical in limiting future deterioration.
There are risk financing solutions that help prevent negative rating actions. For example, ILS capacity has grown and modeled loss covers can be used to address both occurrence- and aggregate-based storm losses.
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