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Commercial auto on the right path, but not likely to stay there: Conning


January 13, 2005   by Canadian Underwriter


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Writers of commercial auto insurance have effected a massive turnaround since 1999, posting strong results last year, but this upward trend is unlikely to last past 2004, says a new study by Conning Research.
In 1999, commercial auto writers posted a combined ratio of 117.8%, but by 2003 were able to turn this around to 95%, marking the sector’s first underwriting profit in 16 years.
“The speed of the turnaround in commercial auto surprised many industry observers and even industry insiders,” admits Conning analyst Clint Harris. “Our analysis indicates that the positive results were widespread, but the recovery is unlikely to continue into 2005 and 2006 for the total industry. Therefore, insurers seeking underwriting profit will need to outperform their competitors.”
The reason the progress of commercial auto writers will likely be cut short is an expected deterioration in loss ratios for 2005 and 2006. And while there has been widespread improvement in the market segment, performance has varied greatly based on what region carriers write in, and the specific business sector they write for. “Understanding and exploiting these differences can help companies position themselves to achieve superior results despite a return to a more difficult market,” concludes Conning research director Stephen Christiansen.


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