August 29, 2010

Are P&C insurance companies telling the truth about their profitability? Or are they playing the same old game of under-reserving losses?

The National Underwriter reports that Moody's Rating Service research shows the P&C industry heading over a cliff. They just aren't sure how far away the cliff is. Moody's says the only reason insurers are profitable in this prolonged soft market is they are tapping reserves built up from 2003 through 2006 when rates were higher. They predict that insurers writing under priced business will see bottom-line losses not that they have used up their "favorable legacy reserve development." It will get worse because companies are offering broader coverages on their under priced business to keep market share.

So when will the day of reckoning arrive?

George Rothert