Completing its assessment of the U.S. commercial market, A.M. Best issued an industry outlook update that notes stability in the market despite soft market conditions, the anticipation of less favorable loss reserve releases and a contracting economy.

While the pricing behavior of commercial lines insurers is always difficult to predict, most key indicators would suggest a flattening in commercial lines rates as we move into the later part of 2010. This shift in pricing will be prompted by intensified margin compression and the need to compensate for lower investment yields, a weaker overall economy and less robust reserve releases. A.M. Best says it also believes loss cost inflation, combined with today’s modest risk-free rate of return, should further fuel up-pricing.

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