The most significant development in recent months has been...
The most significant development in recent months for European insurers and reinsurers has been an indication that US reserving issues may not be as problematic as once feared, at least for some, according to a report published today by Standard & Poor's.
"Converium, Lloyd's, and Royal & Sun Alliance have historically experienced a significant drag on their ratings because of legacy reserving issues,” said credit analyst Simon Marshall. "As a result of recent deals struck by these players, Converium has a positive CreditWatch placement, Lloyd's has a positive outlook, and while the outlook on RSA is still stable, we view the resolution of the legacy issue as a positive development."
Despite these encouraging developments, however, issues remain for the sector. At this late stage in the hurricane season, there have been no significant losses. This will mean strong earnings for the European insurers and reinsurers, but will also potentially damage the pricing environment going forward.
Other critical questions about modeling, pricing adequacy, and underwriting discipline remain unanswered as the renewals season begins.
The UK non-life insurance market faces particular challenges. The motor market stands out as moving toward being uneconomic, and Aviva has already spoken about the need to raise rates.
UK commercial lines and the German
motor market are also under scrutiny, although similar concerns for the rest of the continent have been slower to emerge.
