Despite Continued Releases P/C Industry Reserve Adequacy Stable

The low inflation rate is a contributor to the property/casualty industry’s continued strong overall reserve position despite continued releases, according to a new study by Conning.

“The Property-Casualty industry’s reserve adequacy remains stable in spite of additional reserve releases during 2014,” said Robert Farnam, vice president, Insurance Research at Conning. “On an overall basis, the industry released almost $10.6 billion in reserves in 2014, based on the preliminary data used for this analysis. The 2014 release marks the ninth consecutive year of industry reserve releases.”

The Conning study, “Property-Casualty Loss Reserves: Adequacy Benefits from Low Inflation…for Now” reviews the property/casualty industry’s loss reserve position as of the end of 2014, by line of business and in total.

“Our review of loss reserves for the property-casualty industry suggests that reserves remain modestly redundant, by about 3.5 percent of total carried reserves, even after additional reserve releases seen in 2014,” said Steve Webersen, head of Insurance Research at Conning. “In the core casualty lines of business reviewed, the indicated redundancy is 4.4 percent of core casualty reserves, compared to a 5.0 percent redundancy estimated at year-end 2013. The stability in reserve adequacy may be ascribed to the low inflation, improved pricing and premium growth in recent years. However, much of this reserve strength is also a consequence of muted claims activity associated with the recent recession and weak recovery.”

Source: Conning