The industry compiled a continuation of weak underwriting results in the third quarter of 2001, as catastrophic losses from the Sept. 11 terrorist attacks erased the industry’s earnings for the year, according to a special report, “P/C Underwriting Results Continue to Weaken,” by the A.M. Best Co.
According to the report, the fourth quarter is likely to become a dumping ground for reserve and restructuring charges as insurers write off the year and take the opportunity to straighten out their balance sheets. Accordingly, A.M. Best has revised its full year combined ratio upward by more than seven points to 118.0, from its initial estimate of 110.7. This revised estimate includes six points from the Sept. 11 losses.
On the other hand, underlying results started to improve during 2001, as pricing and re-underwriting initiatives took hold. Reported results should improve in 2002, as reserve additions subside and price increases are more fully earned, assuming catastrophes go back to historical levels.
Nevertheless, attractive pricing gains have already attracted new capital to the market, and A.M. Best believes that reinvigorated competition will start to slow rate gains beginning in the later half of 2002.
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