Workers’ comp reserves appear to be improving, despite deterioration over the last year, and medical professional liability and commercial multi-peril lines also appear to show greater than expected reserve release in accident year 2012, according to an updated analysis of industry reserves from Guy Carpenter & Company LLC, a global risk and reinsurance specialist and member of Marsh & McLennan Companies. Other lines, such as commercial auto liability, continue to deteriorate however.
Guy Carpenter attributes the continued release of reserves to homeowners and private passenger auto lines, which are responsible for 70 percent of the improvement for accident year 2012. “However, there is a lack of a clear cycle for short-tailed lines, which makes it challenging to predict whether accident year 2013 will continue to show releases in 2014,” the company said.
“According to our analysis, accident year 2013 shows more releases than accident year 2012, not less, as we had been expecting,” said Jessica Leong, lead casualty specialty actuary at Guy Carpenter. The company studies reserve movements by accident year rather than financial year, which helps clarify trends. “By analyzing the cycle the same way actuaries do by accident year the trends are clearer.”
Leong explained that the random movements of the reserve cycle for homeowners and private passenger auto lines, the short-tailed lines of business, makes predicting reserves for the 2013 accident year difficult.
“However, long-tailed lines such as workers’ compensation, medical professional liability and commercial multi-peril, also released more reserves for accident year 2012 than for accident year 2011,” Leong said. “That is much more interesting, since these long-tailed liability lines are very cyclical.”
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