Best’s Special Report: U.S. Property/Casualty Industry Loss & Loss Adjustment Expenses Reserves Slightly Deficient

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- The U.S. property/casualty (P/C) industry’s overall carried reserves for loss and loss adjustment expenses (LAE) at year-end 2018 are estimated to be slightly deficient by $29.3 billion, or 3.8% of reported surplus, according to a new analysis by AM Best.

The new Best’s Special Report, titled, “U.S. Property/Casualty Industry Loss & LAE Reserves Slightly Deficient,” states that this amount included $14 billion of asbestos & environmental (A&E) deficiency and $20.7 billion of statutory discount, which was treated as a deficiency from the full value reserves.

Since 2015, the estimated industry reserve deficiency has remained near 5%, and AM Best expects the total reserve deficiency to remain below 5% at year-end 2018. AM Best expects the year-end 2018 overall reserve position to be $3.6 billion stronger than the overall reserve position at year-end 2017. AM Best also expects the A&E reserves to be $2.4 billion stronger than the 2017 year-end A&E reserves and the discounted core reserves to be $1.2 billion stronger than the 2017 year-end discounted core reserves.

On a calendar year basis, the industry continues to report favorable one-year reserve development. In 2017, the industry reported its 12th consecutive calendar year of favorable reserve development. After two years of declining favorable development, the industry reported a higher level of favorable development in 2017. The increase in favorable development in 2017 was primarily from two lines of business: workers’ compensation, which reported an increase in favorable development, and other liability that reported a lower amount of adverse development. AM Best anticipates the industry will report another year of favorable reserve development for calendar year 2018 at a level near the 2017 calendar year.

AM Best also anticipates that the U.S. P/C industry will continue to report favorable reserve development on a total all lines basis in calendar years 2018 and 2019. At the individual rating unit level, reserve risk will be a key driver in the rating process.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=283619.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.