US insurers' reserve redundancy $11.7 billion

Insurers' reserves at YE2011 were redundant by $11.7 billion – or 2 percent of total booked reserves – compared with $22.0 billion at YE2010, after the industry released $12.7 billion of reserves during 2011, according to a study, compiled by Aon Benfield Analytics.

The YE2011 figure is comprised of redundancies in personal lines of $7.6 billion (YE2010: $6.5 billion); commercial property of $1.0 billion (YE2010: $1.5 billion); and commercial liability of $6.7 billion (YE2010: $9.9 billion), offset by deficiencies in workers' compensation of $1.7 billion (YE2010: $6.5 billion redundant), and financial guaranty of $1.8 billion (YE2010: $2.4 billion).

"The headwind against a broad market hardening from reserve releases continued in Q1 2012, as public companies released an additional $4.2 billion of reserves, compared to $4.6 billion in 2011,” said Stephen Mildenhall, chief executive officer at Aon Benfield Analytics.

“However, the forecast is for the winds to abate over the next four to six quarters, with the hard market years slowing and the more recent accident years booked less conservatively.”