Conning Reports P/C Insurers’ Reserve Deficiency More Than Doubles From a Year Ago

January 16, 2003

Despite the P/C industry’s best efforts to have rates keep pace with losses, results are deteriorating, according to new study by Conning Research & Consulting, Inc. In fact, Conning estimates that the deficiency has more than doubled from just a year ago, further straining P-C insurers’ ability to cover the rising cost of claims.

Conning’s most recent study, “Property-Casualty Reserve Adequacy; Digging Dipper,” finds that even though industry reserves were increased by more than 8 percent in 2002, this increase is insufficient to strengthen the reserve position. Price increases, stricter underwriting guidelines, and greater loss controls have not yet constrained poor underwriting results.

“All nine of the P-C lines we studied are deficient with a total reserve deficiency of $38.5 billion, up from $16 billion last year,” Michael Weinstein, Director of Research, Conning Research & Consulting, remarked. “Prudent insurers will carefully examine their results, whether good or bad, to identify and explain why they are better or worse than overall industry results. Insurers cannot simply accept good results and question the bad.”

This study is intended to develop an independent and unbiased view of the P/C industry’s loss experience and compare it to the industry’s estimate. It represents $288 billion of the industry’s $378 billion in reserves, or 76.2 percent. The analysis includes:

*Estimated redundancy/deficiency of the loss reserves for the P-C industry by line of insurance;
*Analysis of the P-C industry’s loss reserves by line of insurance;
*Summary loss and premium data for the P-C industry by line of insurance.

“There are several reasons for the increase in P-C insurers’ reserves,” Weinstein continued. “The ongoing recession, the rising cost of medical care, the emergence of mold and re-emergence of asbestos and other environmental claims, and the lingering impact of September 11 have all contributed to the pressure mounting on P/C insurers’ reserves.”

For more information on the report, log

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