Industry Reserves Adjusted $22 B In 02: Weiss
Weiss Ratings Inc. said U.S. property-casualty insurers increased reserves for prior-year claims by $22.1 billion last year, suggesting that the adjustment reflected a "failure to adequately estimate losses."
Weiss Ratings, based in Palm Beach Gardens, Fla., noted that the industry had already raised reserves by $11.7 billion in 2001.
Weiss said that only four insurance lines–products liability-claims made, international, non-proportional assumed reinsurance property coverage, and auto physical damage–had adequate reserves in 2002.
Lines that required the largest reserve additions in 2002 were:
Nonproportional assumed reinsurance liability, with a $5.2 billion adjustment, following a $2.7 billion 2001 adjustment.
Other liability including asbestos, which also had an adjustment of $5.2 billion after an $855.8 million charge in 2001.
Products liability, at $3.2 billion in 2002 and $1.7 billion in 2001.
Workers compensation, boosted $2.3 billion in 2002 and $2.0 billion in 2001.
Commercial multi-peril, which had reserve hikes of $1.5 billion in 2002 and $945.1 million in 2001.
Homeowners/Farmowners: $1.3 billion in 2002 and $1.1 billion in 2001.
Commercial Auto liability/medical: $1.07 billion in 2002 and $1.6 billion in 2001.
The insurers with the largest 2002 reserves included: American Re-Insurance of Princeton, N.J., at $2.2 billion; Employers Reinsurance of Overland Park, Kan., at $1.9 billion; Columbia Insurance of Omaha, Neb., at $1.1 billion; National Union Fire Insurance of Pittsburgh, a N.Y.-based AIG company, at $1 billion; Travelers Casualty & Surety of Hartford, Conn., with $993 million.
Much of the increases "are the result of asbestos lawsuits, losses from Sept. 11 and the after-effects of the soft insurance market," said Melissa Gannon, Weiss vice president, in a statement.
"Instead of setting aside reserves based on conservative actuarial estimates, insurers in the 90s were under-reserving in an attempt to boost profits. Now its come back to haunt them, effectively driving up premiums for todays policyholders," she said.
Reproduced from National Underwriter Edition, July 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.
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