U.S. P&C industry loss reserve position adequate, Fitch says

The U.S. property and casualty insurance industry’s loss reserves are adequate, based on an analysis of the industry’s position at the end of 2012, Fitch Ratings said Monday.

That makes its position “relatively unchanged from the prior year,” the firm said.

“Low interest rates and low general inflation have promoted claims cost stability for the property/casualty insurance industry,” Fitch said.

“A return to sharply higher inflation appears unlikely in the near term, reducing the risk of adverse reserve movement for insurers. Key claims cost drivers including medical and tort-related costs have been more stable recently as well but remain a potential source of future volatility.”

There are, however, segments that have been more adversely affected by competitive market conditions and the effects of the economic recession on claims trends, Fitch noted. “Workers’ compensation, product liability, and commercial auto liability segments are among the weaker segments,” according to the firm.

On the other hand, medical professional liability, personal auto liability, and other liability continue to show reserve strength, Fitch said.

“For the last seven consecutive calendar years, property/casualty industry prior period loss reserves have developed favorably, positively affecting statutory profitability,” according to Fitch.

“The magnitude of favorable development declined moderately in 2012 and is anticipated to slow further in 2013 and going forward.”