U.S. Reinsurance Sector Still Struggling

By Lisa S. Howard, International Editor

NU Online News Service, Sept. 5, 12:05 p.m.EST?Dramatically improved rating and coverage conditionsfor U.S. property-casualty reinsurers has not brought about anoverall improvement in industry results, according to thefirst-half report of the Reinsurance Association of America.

A group of 30 U.S. p-c reinsurers reported a combined ratio of117.6 for the first half of 2002, compared with 115.6 reported by asimilar group of reinsurers for the same period last year,according to the Washington-based RAA. The combined ratio for thefirst six months of 2002 is comprised of a 90.7 loss ratio and a26.9 expense ratio, RAA noted.

"The increase in rates, and improvements in terms and conditionsare not going to guarantee that the profitability over themedium-term is going to be sustainable," according to LalineCarvalho, an associate director at Standard & Poor's in NewYork.

"Our outlook on the industry is negative and remains negative,even though companies have been reporting very substantial rateincreases and improvements in policy terms and conditions," shesaid. "We're still dealing with an industry that has significantreserving issues. The direct writers have done a lot ofhousecleaning and a lot of reserve strengthening, but we feel thereis more reserve strengthening to come."

Grace Osborne, a director at S&P, predicted that it wouldtake until the end of 2004 for firm profits to start returning tothe industry. "It's a personal view," she said, noting that sheperhaps is more pessimistic than other observers.

However, selected individual RAA companies did turn in goodcombined ratios, demonstrating that some are starting to benefitfrom the hard market.

Concerning the accompanying table of combined ratio results,listed alphabetically, it should be noted that:

? Results at American Re-Insurance Company, which had a combinedratio of 353.4 for the first six months of 2002, compared with107.2 for the same period in 2001, reflect a $2 billionstrengthening of net loss and loss adjustment expense reserves.

? Converium (Reinsurance) North America, Inc., which came in at102.0 for this year's first-half, compared with 102.2 last year,was formerly called Zurich Re (North America).

? Gerling Global Reinsurance, which reported a first-half ratioof 153.3, compared with 116.5 last year, is being put into runoffby its Cologne-based parent, Gerling Group.

RAA First-Half Combined Ratios