US insurers' reserve redundancy during the year 2011 was estimated to be $11.7bn, or 2% of total booked reserves compared to $22bn during the same period last fiscal.
According to a research report compiled by Aon Benfield, the global reinsurance intermediary and capital advisor of Aon points out that the redundancies in 2011 consists personal lines of $7.6bn against $6.5bn during the year of 2010, commercial property of $1bn, compared to $1.5bn a year ago.
Commercial liability of $6.7bn versus $9.9bn during the corresponding period earlier year and financial guaranty of $1.8bn, against $2.4bn during the same period of 2010, as stated by the report.
The study also highlights that the economic bluntness and less favorable trends in loss frequency and severity have resulted in a significant shift in the level of reserve adequacy for workers’ compensation.
The research highlights that during 2012, the favorable reserve development will of $7-10bn will take place, and that the reserve redundancy will be eliminated in 1.1 years at the current run-rate.
The survey found that the reserve redundancy in the two years has decreased from $11bn to $3bn, which is a symbol of continued market pricing pressures.
Aon Benfield Analytics chief executive officer Stephen Mildenhall said, "The headwind against a broad market hardening from reserve releases continued in Q1 2012, as public companies released an additional USD4.2 billion of reserves, compared to USD4.6 billion in 2011. 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."
Aon offers global risk management services, insurance and reinsurance brokerage, and human resources solutions and outsourcing in over 120 countries.