Industry overall (all lines combined) reserves at YE21 are stronger than at YE20, mainly due to excess in recent accident years, according to analysis by Morgan Stanley.
This excess, reflects continued conservatism following the Covid-19 pandemic, analysts noted, which varied by claim and by line.
They estimate a cushion of about $14 billion, which is an improvement of $10.1 billion from the estimated cushion of $4.4 billion at YE20.
Last year, Morgan Stanley highlighted a drop in claim count activity in “Covid-impacted” lines for accident year 2020 (AY20), which continued for AY21.
Yet, despite the drop in claim activity, overall reserves did not drop.
Workers’ compensation – the industry’s largest reserve line according to Morgan Stanley – shows a higher level of reserve cushion, despite significant releases in recent calendar years.
In the case of general liability occurrence, following several years of deficiencies, reserves appear in-line.
Yet, alongside these positive news, Morgan Stanley issued a warning as they saw a higher level of open claims in some of the longer-tailed lines in recent accident years for some companies.
They said: “While we know that an uptick in inflation pressures current period margins for P&C carriers, higher inflation also pressures prior year reserves, more so if the inventory of open claims is higher than normal. We highlight what lines and what companies we’d monitor.”
