The poor performance of stocks could drive insurance rates upward because reserves will be inadequate to deal with losses, according to a report from Standard & Poor's Ratings Services.
In its report, "Insurers' Reserve Adequacy Will Come Under Pressure As Operating Profitability Worsens," S&P said the p-c industry has experienced a declining pricing scenario in the past couple of years following a period of strong pricing that started in 2002 that is affecting reserve adequacy.
Adding to the already weakened pricing environment is the monumental financial crisis facing the global financial markets. With increased pessimism in the global economy and the unprecedented volatility in the financial markets, insurers' loss reserve adequacy, which had been a matter of secondary consideration in the past few years, may once again drive ratings, said S&P.
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