NU Online News Service, June 22, 2:41 p.m.EDT

Keefe Bruyette & Woods says the property and casualtyindustry is under-reserved for accident years 2008-2011 and mostcarriers will see a drop-off in the benefit of favorable reservedevelopment going forward.

Accidents years 2002-2007 remain redundant, according to anupdate issued by the investment bank, but KBW sees many companiestaking reserve charges during the next couple of years.

SEE ALSO: ReportsQuestion Industry's Reserve Strength; Recent Accident-YearReleases

KBW has admitted it was surprised with the strong reserve releases during the firstquarter, among the companies it follows.

In the latest update, KBW says the difference between itspredictions and actual outcomes can be blamed on the data availableand the limitations of its reserving model, adding that aprojection on reserves in the future is “very much an art ratherthan a science.”

Some companies will keep booking favorable development to boostearnings, which may “reduce the urgency to seek substantial rateincreases now,” says KBW.

Looking at some big names in the industry, State Farm andBerkshire Hathaway recorded the most favorable development whileHartford Insurance Group, Liberty Mutual and American InternationalGroup Inc. recorded modest adverse development, according to KBW,citing data from A.M. Best Co.

Total industry reserve development in calendar year 2011 was$13.5 billion—the sixth year in a row for favorable developmentdespite KBW's models showing overall reserve deficiencies.

At year end the industry's loss reserves were 0.5 percentdeficient, concludes KBW. Weak lines include workers' compensation,commercial multi-peril, product liability and nonproportionalassumed liability reinsurance.