Kimberly Muccia, a Financial Analyst at A.M. Best Company, comments on the impact of catastrophic losses on the financial strength of insurers. Among the catastrophes affecting the auto and homeowner lines of business in 2018 were hurricanes and wildfires, resulting in about $17 billion for the Mutual Insurance segment alone.

Despite the losses, Mutuals posted approximately a 6 percent increase in surplus. Ms. Muccia notes three major reasons for the uptick, including net income reported driven in large part to a strong investment market, about $21 billion in unrealized gains, and U.S. tax reform reducing corporate taxes from 35% to 21%.

Ms. Muccia listed the four major components that affect Financial Strength rating, including balance sheet strength, operating performance, business profile, and Enterprise Risk Management (ERM).

The industry is shifting with increased in technological advances, and A.M. Best has taken note of those that have embraced innovation, though smaller carriers tend to lag due to the cost implications. They tend to look to partnerships or affiliations to tap technology platforms and increase their capabilities.

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