US non-life reserves decline

US non-life reserves decline

Non-life reserves in the US primary market deteriorated further in 2013, according to a report just released by Aon Benfield Analystics. Total reserve redundancy fell to $6.5bn, from $9.2bn at the end of 2012. Insurers released $14.8bn of reserves during 2013. That compared with favourable prior-year development of just $11.9bn.

The study found that commercial lines moved further into an overall deficiency, at minus $2.8bn by the end of 2013, compared with a deficiency of $900m at the end of 2012. The $1.9bn increase in reserve deficiency was driven by $12.2bn in reserve releases, which was not counterbalanced by the $10.2bn favourable prior-year development.

copyright Aon Benfield Analytics

In personal lines there was still positive redundancy at the end of 2013, but the reserves of $9.3bn were down from the $10.1bn recorded a year earlier. This was due to the $6.0bn in reserve releases not being counterbalanced by $5.2bn in favourable prior-year development.

Aon Benfield Analytics observed that "most of the reserve cushion of $6.5bn has already been released as of Q1 2014, with $5.4bn of reserve releases". That consisted of approximately $4.1bn of reserve releases in personal lines and $1.4bn of releases in commercial lines.

Aon Benfield Americas chief actuary Brian Alvers said: “Personal lines reserve redundancy continues to support the overall industry reserve position, though almost 45% of it had been released at the end of the first quarter of 2014”.

In pricing, commercial casualty rates in Q1 2014 were up year on year, the 13th consecutive quarter when year on year increases have been recorded.

copyright Aon Benfield Analytics

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