Capital reserves for U.S. commercial lines overall moved to a deficiency position of $900 million at the end of 2012, compared to a $4.1 billion redundancy at the end of 2011, according to “U.S. P&C Industry Statutory Reserve Study,” from Aon Benfield Analytics.

According to the report, reserves deteriorated in commercial liability, workers’ compensation and financial guaranty. Only property lines experienced an increase in reserve redundancy.

“While personal lines reserves still show a meaningful amount of redundancy at year-end 2012, almost 40 percent of it had been released by the end of the first quarter of 2013,” said Brian Alvers, chief actuary for Aon Benfield Americas. “Commercial lines reserves, which were redundant at year-end 2011, have now swung to a deficient position of almost $900 million at year-end 2012, and continued reserve releases of approximately $1.6 billion in the first quarter of 2013 have increased pressure on this segment. Rates in commercial lines sector of the insurance industry have been rising for the last eight to nine quarters, and the lack of reserve cushion should continue to fuel a hardening market in the commercial lines sector.”

The overall industry redundancy position decreased to $9.2 billion at the end of 2012, which is equivalent to 1.6 percent of total booked reserves, Aon Benefield Analytics found. At the end of 2011, the total industry redundancy position was $11.7 billion, of which insurers released $9.9 billion during 2012. Personal lines’ redundancy increased to $10.1 billion at year end, which helped support the total industry position.

The annual study examines U.S. statutory Schedule P triangles to generate an overall industry position from a by-line analysis, the company said, and as it is based on U.S. insurers’ ongoing statutory filings, and is subject to fluctuations in its data.

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