Prior year losses and flattening prices stymie U.S. insurers

Decelerating premium increases and adverse loss-reserve development chipped away at the strong premium growth and improved underwriting results of U.S. insurers in the first nine months of 2003, says rating agency A.M. Best.
Each of reinsurance, commercial primary and personal lines primary achieved premium growth which reduced underwriting losses to US$5.2 billion for the first nine months of this year, down from US$19.0 billion for the first three quarters of 2002.
However, as in the first two quarters of this year, the third quarter saw price increases flatten compared to 2002, despite evidence of severe under-pricing between 1997 and 2001 revealing itself through adverse development. This adverse development knocked off about US$4.75 billion from third quarter 2003 underwriting results.
Specifically, property rates have peaked, and while price increases and stricter terms are expected to continue, signs of market competition are showing. And asbestos and environmental liabilities will continue to challenge results, along with continued weak investment returns.
Nonetheless, A.M. Best predicts the industry will be able to add to surplus at the end of 2003, for the first time in three years.