US insurers’ loss reserves deficient by $30 billion, says Moody’s

While many primary insurers and reinsurers strengthened reserves during 2002 and 2003, the rating agency says the industry’s loss reserves for these casualty lines remain “significantly inadequate”.

"Further downgrades could materialise if prior accident reserves develop worse than our current expectations, or if the profitability of business written at the present time turns out to be somewhat less robust than expected," said Sarah Hibler, a senior credit officer at Moody's and primary author of the new report, 'US P&C Insurance Reserves - Still Deficient, but Improving'.

The study – which encompassed analysis of 50 of the largest property and casualty companies – revealed that a significant proportion of reserve deficiency is concentrated in commercial lines carriers and a number of diversified companies and reinsurers. As of September 30, 2003, Moody's estimates that the industry's core reserves, excluding asbestos and environmental exposures, were deficient to the tune of about $30 billion.

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