With greater uncertainty regarding reserve adequacy for U.S. property/casualty insurers, Fitch Ratings examines statutory reserve fundamentals of the industry's largest insurers in a new report, to consider relative exposure to reserve volatility going forward.
The report reviews historical business segment reserve development that shows significant differences in development experience by line, demonstrating that long-tail liability and casualty lines produce the most volatile loss ratio movement as accident years mature. As such, the report compares individual insurance groups for differences in reserve mix and loss payment patterns. Reserve leverage is also considered as the level of reserves relative to surplus influences the effect that any reserve deficiency/redundancy has on reported capital.
Also considered are differences in actual reported accident year reserve development across the subject group, as there are individual insurers with riskier reserve profiles that have demonstrated more favorable longer term reserve performance.
The report 'Property/Casualty Insurer Statutory Reserve Experience' dated Feb. 16, 2011, is available at 'www.fitchratings.com' under the following headers:
Financial Institutions then Insurance then Special Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Relevant Research:
'Non-Life Insurance Rating Methodology', March 24, 2010;
'Insurance Rating Methodology', Aug. 16, 2010.
Applicable Criteria and Related Research: Property/Casualty Insurer Statutory Loss Reserve Experience
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=605665
Non-Life Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506369
Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547766
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