All hurricanes and terrorism threats aside, the fundamental strength of the US property and casualty insurance industry has remained strong over 2006, says ratings agency AM Best.

Improved operating results, stemming from strict underwriting and price discipline, have helped build the industry’s surplus base. The latest analysis shows loss ratios have declined in almost all commercial lines.

However, AM Best remains concerned about some aspects of the North American market. The rising surplus levels may make it difficult for companies to maintain the underwriting discipline that helped create such a strong industry this year.

“Had it not been for this controlled approach, overall industry results would have been remarkably worse, with the industry having suffered its worst property loss ever.”

With plenty of cash on hand to pay claims, that task will be all the more difficult in 2007.

AM Best has upgraded more companies than it downgraded in the 12 months to July 1 – the first positive ratings ratio since 2000.