Conning says industry reserve position is improving

In its analysis of yearend 2003 results, New York-based Conning Research says the U.S. p&c industry has strengthened its reserve position, even if further bolstering is still required.
The reserve deficiency estimate based on “schedule P” filings by insurers, which covers 10 years of data on paid and incurred loss developments is US$8 billion for yearend 2003, much improved over the US$24.8 billion deficiency estimated for yearend 2002. It is important to note that the Conning estimate includes only liability/casualty reserves and does not include asbestos, reinsurance, property, financial and combined specialty lines, due to lack of complete data in these areas within the schedule P filing.
“The improvement in the reserve position for the property-casualty industry has been rapid and all-encompassing, leaving no line of business unaffected. Yet while there has been significant improvement, additional reserve strengthening is still needed,” says Geri Riley, Conning Research analyst.
With the expectation for increasing competition, already evident in the second half of 2004, there is cause for concern that loss growth will follow, along with premium declines and reductions in reserve strength. “When rates do not keep pace with loss growth, there is certainly reason for concern about the industry’s loss reserve position going forward,” Riley says.