According to an analysis of loss reserves published in mid-March by Assured Research, 2023 marked the 18th straight year that the U.S. P/C industry’s loss reserves developed favorably—by about $2.3 billion. That’s the good news.

Executive Summary

Predictions that the property/casualty insurance industry is in the midst of repeating the type of loss reserving cycle that accompanied the hard market of the beginning year of this century may be overblown, according to Assured Research's William Wilt.

Even though Assured Research now estimates that the overall redundancy of U.S. P/C carried reserves is about half what it was in each of the past three years, he believes that the nearly $8 billion added to the two most problematic lines has likely filled the financial hole the industry had dug from accident years 2016-2019. And reserve redundancies from workers compensation continue, he writes.

The more concerning news is that the favorable development was only about one-third of the average of the past five years. Moreover, most liability lines of business developed adversely. We can thank workers compensation and a collection of short-tailed property lines—including auto physical damage—for keeping the industry’s long string of favorable development intact.

How worried should industry professionals be?

Our message, captured in the title of our report, is to “keep calm and carry on.” This year, after the industry added nearly $8 billion of loss reserves to the two most problematic lines—other liability occurrence and commercial auto liability—we think much (but not all) of the financial hole the industry had dug from accident years 2016-2019 has now been filled. Meanwhile, the wellspring of reserve redundancies from workers compensation seems far from dry. But tempering that good news is what we perceive to be red-hot loss ratios in commercial auto liability where we forecast loss ratios largely unchanged from the soft cycle (and that after a decade of material rate increases and underwriting actions).

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