Conceptually, can someone explain to me how there could be a COR of 99.7 in 2021, but an underwriting loss of $5 billion. If the COR was below 100, shouldn’t there have been an underwriting gain, or is there something additional being taken into account to arrive at the underwriting loss in 2021 that a COR would not use in it’s calculation?
The reason is the reserve development. Here is a quote from last year’s AM Best report: “The combined ratio for the industry weakened from the prior year to 99.6. We estimate that catastrophe losses accounted for 7.7 points on the 2021 combined ratio, down from an estimated 8.0 points in the prior year. Excluding $5.7 billion of favorable reserve development in 2021 (down from the $7.2 billion of favorable reserve development recorded in the prior year), the accident year combined ratio for the industry was 100.5.”
The report was published on March 9, 2022 and titled “First Look: 12-Month 2021 US Property/Casualty Financial Results.”
Conceptually, can someone explain to me how there could be a COR of 99.7 in 2021, but an underwriting loss of $5 billion. If the COR was below 100, shouldn’t there have been an underwriting gain, or is there something additional being taken into account to arrive at the underwriting loss in 2021 that a COR would not use in it’s calculation?
The reason is the reserve development. Here is a quote from last year’s AM Best report: “The combined ratio for the industry weakened from the prior year to 99.6. We estimate that catastrophe losses accounted for 7.7 points on the 2021 combined ratio, down from an estimated 8.0 points in the prior year. Excluding $5.7 billion of favorable reserve development in 2021 (down from the $7.2 billion of favorable reserve development recorded in the prior year), the accident year combined ratio for the industry was 100.5.”
The report was published on March 9, 2022 and titled “First Look: 12-Month 2021 US Property/Casualty Financial Results.”
Thank you for the explanation!
And thank you for your interest!
Confused, losses are “down”? Looks like they are way, way up from what I can see.
Definitely some confusing wording on my part. It has been corrected. Thanks for the heads up.