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Member, Beacon International Group, Ltd.
The U.S. property/casualty insurance industry already has tapped significant reserve redundancies, Moody’s Investors Service said in a report released Thursday.
That means the insurers will have a narrower cushion for the next 12 to 24 months, New York-based Moody’s said.
The report“U.S. P&C Insurers Harvest Significant Reserve Redundancy” says a weak pricing environment is the primary challenge for domestic property/casualty insurers to build reserves at the same pace as recent years.
The report said insurers reported less, though still substantial, benefit from reserve releases in their 2009 statutory earnings compared with 2008.
“Though we believe reserves are still redundant as of year-end 2009, we expect that as reserve releases taper off, coupled with lower investment yields, insurers will either raise prices or experience continued pressure on underwriting profitability,” Moody’s Analyst Enrico Leo said in a statement accompanying the report he wrote.
“Continued deterioration for 2008 and 2009 accident years is likely to offset benefits received from older accident years, leading to a reduction in total reserve releases over the medium term,” Mr. Leo said.
Copies of the report can be requested at www.moodys.com.