While the property-casualty insurance industry is showing signs of continued improvement to its bottom line, the industry still is faced with challenges from continued downgrades and a substantial loss-reserve deficit, according to a special report from A.M. Best.
The analysis, titled "Despite Continued Market Improvement, Rating Downgrades Outpace Upgrades," was written by Michael Venezia, senior financial analyst with the p-c division of the Oldwick, N.J.-based rating agency.
Mr. Venezia wrote that despite strong operating momentum that has contributed to insurers' surplus base, the industry needs several more profitable years to overcome a $59 billion loss-reserve deficiency. The deficiency, he notes, is driven by asbestos and environmental liabilities and medical-cost inflation. These concerns are compounded by weather-related severity losses.
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