U.S. casualty loss reserves at approximately 2.9% redundancy

The property-casualty insurance industry reserve position has deteriorated slightly in 2008 when compared with analyses of previous years, reports Conning Research & Consulting Inc.
In its report, Property-Casualty Loss Reserves: Once More to the Well, Conning reports that the U.S. property and casualty industry released almost US$14.5 billion in reserves from years 2007 and prior, excluding reserve additions in the financial and mortgage guarantee lines (US$12.6 billion).
Conning’s study is based on aggregated reviews of net loss reserves as reported in Schedule P of the 2008 annual statutory statements. Schedule P lines include all casualty lines, but Conning’s review focuses on the major casualty lines of business representing 75% of all loss reserves.
“Overall, the industry appears to continue to have sufficient reserves, under reasonable assumptions of claims settlement patterns,” the report says.
“Current indications suggest a possible redundancy of 2.9% at the end of 2008 for the lines of business reviewed, including some provision for continued adverse development in the tail (over 10 years), compared with an indication in 2007 of a 4.7% redundancy.”
The majority of the apparent redundancy in all lines of business is found in accident years from 2004 to 2006, in spite of considerable releases in reserves over the past three years, primarily from these accident years, it adds.