Category Actuarial / Analytics

Mar
31
2017

Assessing the State of the Casualty Insurance Market

George Zanjani – While property losses from natural disasters such as Hurricane Matthew may grab headlines in the insurance press, casualty losses often drive the more significant cyclical disruptions in the U.S. market. Fortunately, casualty reserving for recent policy periods looks relatively healthy, although pressure from falling interest rates is starting to mount. The opening […]

Feb
17
2016

Beyond the New Normal: Could the Surplus Lines Market Be Heading for a 10% Market Share?

A few years ago, I posed the question of whether the nonadmitted market had reached a “new normal” in terms of market share, or whether it was destined to retreat to its historic norms. To date, there has been little sign of retreat. According to A.M. Best’s annual survey of the market, surplus lines market share edged up to 7.1% in 2014. With the previous hard market peak a decade past, the market’s resilience suggests that maybe, instead of fretting about retreat, we should be considering a different question: Could the surplus lines market be heading even higher? In this post, I’ll cover three ongoing trends that could propel the market beyond a 10% share: 1) declining interest rates, 2) big data, and 3) catastrophe risk.

Nov
11
2014

US Reserve Adequacy: Diminishing Returns

Stephen Mildenhall – With reduced equity in reserves, mistakes in underwriting, rate monitoring, and primary pricing will no longer be covered up by a reserve cushion Reserve releases in the US are now in their eighth consecutive year, heightening concerns insurers are cutting reserves too aggressively. We can form an independent opinion about the adequacy […]

Oct
14
2014

Revolutionary Times in Auto Insurance Pricing

Marty Ellingsworth – For years, auto insurers have used crude miles driven classification schemes in their premium calculations. The logic of crude schemes presumably lay in the difficulties of verification: Carriers didn’t want to spend money on audits and could not fully trust self-reports. This situation is in the process of changing drastically. Technological change […]

Mar
18
2014

The Rising Importance of Property Catastrophe Risk in the “New Normal” of the Nonadmitted Market

George Zanjani – Last summer, I wrote a piece speculating on whether the nonadmitted market had reached a “new normal.” Nonadmitted market had been hovering close to 5% for a few years, even though 1) the historic norm is about 3% and 2) the hard market of the early 2000’s had ended some time ago. […]

Dec
19
2013

Shifting Benchmarks: How Falling Interest Rates Complicate Performance Measurement in Long-Tailed Lines

George Zanjani – Falling interest rates are rendering traditional rule-of-thumb obsolete when evaluating profitability in liability insurance. Performance benchmarks such as the loss ratio need to be adjusted for the fact that fixed income investments return much less than they used to. Appearances can be deceiving. At first glance, liability results seemed quite strong overall […]

Jul
15
2013

A “New Normal” for the Nonadmitted Market?

Despite some ups and downs, the first decade of the new millennium was a good one for business volume in the nonadmitted market. Nonadmitted business (defined as any business written by an unlicensed company, excluding RRGs) soared from $11 billion in 2000 to $24 billion in 2011. Viewed differently, from 2000 to 2011, nonadmitted premium volume grew at a healthy 7% annual rate.

Jun
19
2013

Disappearing Risk

2012 saw the ninth year of softening property casualty pricing measured by net written premium as a proportion of US GDP. In 2010 the proportion moved below 3% for the first time since 1974, and it stayed below 3% in 2011 and 2012. In 2003, the peak of the last hard market, property casualty insurance premium represented 3.6% of the total economy; by 2012 the proportion had decreased to 2.9%, a reduction of 0.7 percentage points of the entire economy – a massive movement for the industry.

Apr
30
2013

Are We There Yet? A Review of Liability Reserving

George Zanjani – If you’re in the habit of spending time around insurance brokers, you probably found them a bit cheerier in 2012. “Things are picking up!” was a common refrain I heard throughout the year. Many report higher volumes and firmer prices. Some are even going so far as to call a turn in […]

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