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Reserve releases to augment U.S P&C underwriting profits: KBW

16th April 2019 - Author: Matt Sheehan

Analysts at Keefe, Bruyette & Woods (KBW) are anticipating that 2019/2020 underwriting results for the U.S property and casualty (P&C) re/insurance sector will be augmented by higher than expected reserve releases.

share-buy-back-moneyKBW estimates that the U.S P&C industry’s overall year-end 2018 statutory loss and defence and cost containment reserves were overstated by about $13.9 billion, compared to $6.7 billion at year-end 2017.

The firm attributed the industry’s recovering reserve redundancies largely to rate increase in 2018 in most lines of business, along with sustained favourable workers’ compensation loss development profits.

Significant redundancies within workers’ compensation and several other lines were partly offset by inadequacies in commercial auto liability, product liability, and other liability in 2018, analysts said.

KBW also observed that releases in 2017 and 2018 were both significantly above the cyclically declining levels experienced between 2013 and 2016, reflecting the benign workers’ compensation loss environment.

Reserve adequacy was found to vary significantly by line, which analysts believe reflects varying underwriters, varying pricing trends, and varying loss trends.

Recent years’ reserve development also varied by line of business, although most lines still had net releases in 2018.

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