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Fitch: Risks for Deficient Reserve Positions Are Heightened for U.S. P/C Industry

Source: Business Wire

Posted on 04 Nov 2009

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While industry reserves for the U.S. property/casualty industry were adequate at year-end 2008, the risk of the market moving toward a deficient reserve position is heightened going forward, according to Fitch Ratings.

In a new report, Fitch provides an analysis of property/casualty industry reserves at year-end 2008, examining recent reserve development trends, Fitch's estimate of industry reserve adequacy, and consideration of several statistical factors that reveal a recent modest weakening in reserve levels.

According to Fitch's analysis, the potential for the market to shift toward a future reserve deficiency is greater now due to the following factors:

-- Fitch's estimate that any redundancy in loss reserves for most recent accident years at year-end 2008 is more closely offset by projected deficiencies in asbestos and environmental losses, and other prior year exposures.

-- Continued reporting of strong favorable reserve development in 2009 first-half statutory reporting.

-- Questions whether the redundancy of hard market accident years 2003-2006 is now fully reflected in reported reserves.

-- Indications that most recent 2007 and 2008 accident years are more likely adequately reserved and will not develop redundantly over time. For a copy of the report titled 'Property/Casualty Industry Loss Reserve Adequacy: At A Crossroads ' dated Nov. 2, 2009, please see the Fitch Ratings web site '' under the following headers: Sectors>>Insurance>>Topical Research & Special Reports.