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Matthew Lerner

Insurers to continue to release reserves in most lines: Guy Carpenter

April 30, 2014 - 2:38pm

Insurer Reserve Cycle Analysis


Insurers will continue to release reserves during 2014, according to a report issued Wednesday by Guy Carpenter & Co. L.L.C.

Using 2013 statutory filings, Guy Carpenter, a unit of Marsh & McLennan Cos., examined accident year data for 11 lines of business, discovering that workers compensation reserves “appear to be improving” after deterioration over the last year while other lines including commercial auto liability “continued to exhibit deterioration.”

“Workers compensation reserve deterioration has caused some headaches in the last year,” said the report, adding that “the cycle appears to have turned around.”

“The commercial auto liability line has been deteriorating since accident year 2010 and continues to deteriorate. Insurers are seeing an increasing 'frequency of severity' — more large severity claims than expected,” said the report.

“According to our analysis, accident year 2013 shows more releases than accident year 2012, not less, as we had been expecting,” Jessica Leong, lead casualty specialty actuary for Guy Carpenter, said in the statement.

Personal lines — homeowners and private automobile — are responsible for 70% of the improvement for accident year 2012, according to the report. “We speculate that property catastrophe issues may be behind the release of reserves for the homeowners line for accident year 2012,” said the report.

The lack of a clear cycle for short-tailed lines, however, makes predicting whether accident year 2013 will continue to show releases in 2014 more difficult, Guy Carpenter said in the statement.

“The somewhat random movement of the reserve cycle for short-tailed lines of business, such as homeowners and private passenger auto lines, makes it harder to predict what the future holds for the 2013 accident year,” said Ms. Leong.

 



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