Reserve-Release Decline May
Spell Greater Rate Increases
BY MARK E. RUQUET
ThirD-qUArTer reserve releases declined nearly 19 percent over the same period a year prior—which could put greater pressure on carriers to increase rates, according to analysis by
Stifel nicolaus.
in its report, the financial-services firm
says it reviewed 55 publicly traded insurance companies and found net releases for
the third quarter of this year stood at $1.54
billion, compared to $1.9 billion for the
same period last year.
The drop suggests that “reserve releases
are decreasingly masking accident-year
underwriting result deterioration” resulting from the prolonged soft market, claim
inflation and catastrophe losses.
Of those surveyed, six insurers
accounted for 60 percent of the total
reserve releases. Those carriers were ACe,
Allstate, Chubb, Markel, Partnerre and
Travelers.
More than 56 percent of the companies
Of those surveyed, six insurers
accounted for 60% of the
total reserve releases: ACE,
Allstate, Chubb, Markel,
PartnerRe and Travelers.
surveyed reported lower reserve releases on
a year-over-year basis for the third quarter.
eleven of the 55 companies, or
20 percent, reported unfavorable loss
developments.
While most insurers say they are
getting rate, Stifel nicolaus says “few—
if any—insurers reported rate increases
that currently match or exceed claim-
cost inflation.” The analysts add that
any interest increase from investments
“seems very remote.”
“We expect steadily more insurers to
raise rates or walk away from unprofit-
able business, morphing into [around] 10
percent rate increases by mid-2012,” the
report states.
Such increases benefit brokers first by
increasing their commissions and earnings,
notes Stifel nicolaus. On the other hand,
insurers’ return on equity will be chal-
lenged until rate increases begin to show
underwriting profit. NU
Indecisive Energy Market is ‘Harft,’ Says Marsh
BY CHAD HEMENWAY
The energy market is difficult to read, says a new report by Marsh—so much so that one official classified
current conditions as a “harft” market.
Of course, the makeshift word implies
the energy-insurance sector is neither
definitely soft nor hard.
“The fundamentals still point to a
soft environment, but the reality of the
marketplace is much more complex,” says
Jim Pierce, global chairman of Marsh’s
energy practice. “Capacity is in a state of
flux.”
The U.S. liability sector is seeing a clear
change in the market for excess capacity,
the Marsh report says.
“The fundamentals still point
to a soft environment, but the
reality of the marketplace is
much more complex.”
Jim Pierce, Global Chairman of
Marsh’s Energy Practice
