Long-tail casualty reserves upped in 2023, need more for ’24: AM Best
Reserves for long-tail casualty lines had to be bolstered in 2023 and will require further strengthening for the short- to medium-term, analysts at AM Best have claimed.
“Reserves for accident years 2015 to 2019 continued to strengthen, a trend we expect will hold over the short to medium terms, depending on an individual insurer’s reserving philosophy,” analysts wrote in research devoted to the use of legacy markets for containing reserve risk.
“The numbers and the stories behind them indicate worsening reserve risk,” analysts claimed.
No matter your method, things have gotten trickier in estimating reserve adequacy, AM Best noted, highlighting the value of legacy reinsurance protections in grounding financial stability ratings.
The impact of Covid-19, new risks, the spike in economic inflation and the myriad of factors driving social inflation have thrown a wrench into every actuarial and stochastic model, analysts noted.
Legacy transactions are falling under the AM Best microscope as a key mitigator to reserve risk as the transaction category has growth in scale. Adverse development covers, loss portfolio transfers, aggregate stop loss deals and the like can be important protections and the industry growth has made the selection more strategic in terms of capital, earnings and even relationship with the insured.
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