The U.S. property-casualty industry improved its reserve position substantially in 2006, according to a new study by Conning Research and Consulting Inc.

“Overall, the industry appears to have more than sufficient reserves, under reasonable assumptions of continuing inflation and claims settlement patterns,” said Stephan Christiansen, Conning Research & Consulting research director.

Several years of strong premium growth, coupled with moderate loss growth, have enabled the industry to add to loss reserves, he added.

The Conning study is based on an analysis of historical data composed of paid losses and reported loss development for the casualty and liability lines.

Insurers, the firm said, have increased rates, strengthened reserves and reduced the reserve deficiency that Conning has been tracking for at least the past seven years.

The estimated reserve position for the casualty lines of insurance decreased from a deficiency of 4.3 percent of carried loss reserves at year-end 2004 to an estimated redundancy of 5.3 percent of carried loss reserves at year-end 2006, Mr. Christiansen said.

“However, with a closer look at reserves aged more than ten years, we see a need for additional strengthening in some lines of business, particularly in the reserves carried for those older years,” he said.

The long-tailed lines of workers' compensation and other liability-occurrence are among the ones where this need is the greatest. “But also, it is seen in private passenger automobile and commercial multiperil,” Mr. Christiansen said.

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Study Finds 2006 P-C Reserves Improved

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