Loss Reserving Haunts Insurers
National Underwriter News
June 16, 2005
A Standard & Poor's study has found that reserving difficulties continue to haunt property-casualty insurers.
According to the S&P new research, p-c insurers boosted reserves for old business by $10 billion in 2004, which made it the sixth consecutive year of reserve hikes, following $14 billion in 2003 and $22 billion in 2002.
The S&P analysis, released this week at its annual insurance conference here, is titled "Amid Record Profits, Loss Reserving Remains A Sticky Issue For U.S. P-C Insurers."
S&P warned that it doesn't expect the industry to break its habit of releasing reserves in bad underwriting years and boosting reserves in good ones. What's more, S&P cautioned that although insurance executives have ultimate controls in setting reserves each year, newly heightened regulatory sensitivities about managing earnings will limit their flexibility and, ultimately, will cause more volatility in earnings and capital.