New AM Best Commentary Outlines Major Issues For Insurers
The duration of the current Federal Government shutdown is poised to trigger escalating challenges for insurers, warns AM Best in its latest Best’s Commentary, “US Government Shutdown May Increase Economic Uncertainty for Insurers.”
“The potential government shutdown coincides with increasing evidence of a slowing U.S. economy,” said Ann Modica, director, Credit Rating Criteria, Research and Analytics, AM Best. “Annual real GDP growth is expected to decelerate in 2025; inflation has been persistently above the Federal Reserve’s 2.0% target; and more recently, the labor market is showing signs of weakness. Although trade tensions have moderated at times in recent months, they continue to weigh on business sentiment and could further undermine investment and hiring decisions.”
A prolonged federal government shutdown threatens to disrupt insurer operations and destabilize ACA marketplace enrollment, as delayed payments and expiring subsidies compound financial uncertainty. According to AM Best, insurers could face postponed reimbursements for federal employee benefit programs, prompting some health insurers to rely on lines of credit to maintain liquidity.
While programs like Medicare remain unaffected, the expiration of enhanced subsidies for ACA individual exchange enrollees could significantly reduce marketplace participation, as many Americans may no longer afford coverage. With open enrollment beginning November 1, a continued shutdown could directly interfere with access and affordability during a critical period.
The National Flood Insurance Program, a program under the auspices of the Federal Emergency Management Agency, has now expired. The program, which was awaiting authorization of an extension by Congress, expired on September 30th due to the inability of Congress to vote on it prior to its expiration.
Ultimately, the damage inflicted by the Federal Shutdown will increase in both direct and indirect costs the longer it continues.
