Combined ratios in U.S. property and casualty likely to break 100% by year-end

A.M. Best Co. has revised its year-end projections for the U.S. property and casualty industry, noting the adjusted combined ratios for the overall and individual segments of the industry will each likely break the 100% mark.
A.M. Best believes the overall combined ratio will increase to 103.2%, up from the initial projection of 98.6% published in its Jan. 2008 forecast, a release says.
“For the first six months of 2008, catastrophe and storm losses added approximately five points to the industry’s overall combined ratio, while losses linked to mortgage and financial guaranty insurers added an estimated two points,” it continues.
The personal lines segment’s combined ratio will likely increase to 102.5% by the end of 2008, up from the initial forecast of 99.5%.
“The revised combined ratio is largely the result of unprecedented catastrophic activity in the first half of the year, particularly with regards to the frequency of events in the Midwest, as well as hurricane activity along the Gulf Coast,” A.M. Best notes.
Based on developments within the commercial lines segment, the ratings agency is projecting an increase in combined ratio from 97.5% (the initial projection) to 104.%.
“The increase primarily reflects unprecedented underwriting losses reported by mortgage and financial guaranty insurers, which added approximately five points to the segment’s combined ratio during the first half of 2008,” the release says.
Finally, the reinsurance segment’s year-end combined ratio will likely be 103%, up from the forecasted 99.%.
“This revision reflects the segment’s mid-year 2008 underwriting results, estimated impact of losses related to Hurricane Ike and a reduced amount of favourable loss reserve development expected for the remainder of the year.”