A report from Aon Benfield says U.S. P&C insurance reserveredundancy dropped 21 percent in 2012, as commercial lines slid toa deficit for the year.

The report says total estimated reserves stand at $9.2 billion,down from total industry reserves of $11.7 billion in2011.

Commercial lines stood at a deficit of $900 million compared to$4.1 billion redundancy in 2011.

Among the lines falling further into reservedeficiency 2012 are Workers' Compensation and FinancialGuaranty. Workers' Comp deficit grew $2.2 billion to $3.9 billionand Financial Guaranty went up slightly by $100 million to $1.9billion.

Personal lines reserve redundancy grew $2.5 billion to $10.1billion.

Aon Benfield Americas Chief Actuary Brian Alvers says whilepersonal lines reserves showed “a meaningful amount of redundancy,”the industry released almost 40 percent of the redundancy by theend of the first quarter of 2013.He says commercial lines continuedto release reserves to start the year–$1.6 billion during the firstthree months, which “have increased pressure on this segment,” saysAlvers, in a statement.

The lack of reserve cushion will push commercial line rates evenfurther, he says. The most recent MarketScout report on commercial line rates put the increases for Mayat 5 percent holding a steady rate of increase over the past threemonths. Aon Benfield says all company rates have increased for nineconsecutive quarters, dropping slightly in Q1 2013 to less than 8percent. Personal lines are rising also, as MarketScout says ratesrose 4 percent in May.

The report attributes the deficit in commercial lines to thecombination of a significant portion released in 2012;deterioration in loss experience in accident years prior to 2012,and the 2012 accident year booked at a deficiency. On the personallines side, 2012 reserves regained strength from favorable lossexperience for prior accident years and conservatively booked 2012accident year.