P/C Industry 2011 Loss Reserve Position Sufficient, but Challenged: Conning Research

June 27, 2012

The property/casualty industry appears to have sufficient reserves, but older reserves continue to develop adversely in 2011, according to analysis by Conning Research & Consulting.

“Our view of the property/casualty insurance industry reserve position is that it has deteriorated slightly in 2011, when compared to our previous annual analyses,” said Stephan Christiansen, director of research at Conning Research & Consulting. “On an overall basis, the industry released in excess of $11 billion in reserves in 2011. Excluding reserve strengthening in the financial and mortgage guaranty lines of $1.1 billion, the industry released more than $12.5 billion in reserves in covered lines in 2011 from years 2010 and prior, representing almost 2 percent of reserves carried in the prior year.”

The Conning Research & Consulting study, “2011 Property-Casualty Loss Reserves: Another Year of Releases, No Clear Trends” analyzes preliminary 2011 statutory data from Schedule P as part of Conning’s ongoing annual review of the balance sheet position of both individual lines of business and the property/casualty industry as a whole.

“Overall, the industry continues to appear to have sufficient reserves, with a modest degree of safety, under assumptions that claims settlement patterns will continue apace,” said Christiansen. “However, older years continue to develop adversely. More significantly, some adverse development in the most recent calendar year is providing a hint that beneficial trends may be turning. The inadequate position of the over 10-year reserves has moderated in this most recent year, but will continue to pressure those companies with significant legacy reserves, compared to newer entrants. If history is a guide, this increasing competitive challenge once again may lead to a reversal of these favorable trends in reserve strengthening.”

Source: Conning Research & Consulting

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