A.M. Best's Property-Casualty Review/Preview Report; Keeping Pace - Success for Some, but Pressures Remain.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 9, 2004 While underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. improved, with a year-end 2003 combined ratio forecast at 101.1, the property/casualty industry has a long way to go before strong returns can be achieved, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. A.M. Best Co.'s annual Review/Preview report. Recent improvements in operating performance have been hard fought and aren't without continued pressures from a variety of fronts. Continued underwriting enhancements, cost efficiencies, price monitoring and investment diversification are just a few of the necessary fundamentals to stay ahead. The market has waited for the first sustained period of price firming for more than 15 years. While rates in most segments have improved markedly in recent years, they came from a very depressed level, leaving uncertainty for the adequacy of rates even after a series of significant rate actions and underwriting restrictions. Rate increases have slowed or have even flattened flat·ten v. flat·tened, flat·ten·ing, flat·tens v.tr. 1. To make flat or flatter. 2. To knock down; lay low: The boxer was flattened with one punch. in some cases, namely in property. However, it's too soon to tell if rates are appropriate. But one thing is certain: the low-interest-rate environment has put more dependence on underwriting results as the principal driver of operating performance. Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. has contributed to market turns in the past. Looser pricing and standards can soften a market, while the inverse (mathematics) inverse - Given a function, f : D -> C, a function g : C -> D is called a left inverse for f if for all d in D, g (f d) = d and a right inverse if, for all c in C, f (g c) = c and an inverse if both conditions hold. can drive it in a more positive direction. Certainly, pricing and changes in terms and conditions have contributed significantly to the harder market in recent years. Established companies and the rash of new start-ups launched after Sept. 11, 2001, have brought more than $16 billion of new capacity. While these companies have grown over the past two years, it was basically from market disruptions Market Disruption A situation where markets cease to function in a regular manner, typically characterized by rapid and large market declines. Market disruptions can result from both physical threats to the stock exchange or a unusual trading (as in a crash). in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , London and Europe, and not from the significant undercutting of prices. The industry needs to continue to adhere to adhere to verb 1. follow, keep, maintain, respect, observe, be true, fulfil, obey, heed, keep to, abide by, be loyal, mind, be constant, be faithful 2. the stricter underwriting disciplines reintroduced--or perhaps introduced--over the past two years. By maintaining underwriting fundamentals, the industry can better mitigate the myriad other issues, including weather, investment, inflation, regulatory and political issues. Some of the trends and issues A.M. Best expects to see in 2004 include: -- Prices continuing to increase, as many variables erode Erode (ĕrōd`), city (1991 urban agglomeration pop. 361,755), Tamil Nadu state, S India, on the Kaveri River. The city is located in a cotton-growing region, and its industries include cotton ginning and the manufacture of transport equipment. the adequacy of pricing, including loss-cost trends, reinsurance costs, interest rates and prior-year reserve development. -- Further sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. reserve actions as more companies move to
solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. their balance-sheet strength, given the strong pricing environment. -- The spread in the use of ratings trigger clauses by brokers and tougher acceptance guidelines for reinsurers. -- Companies maintaining discipline and a strong balance sheet will be in a position to take advantage of capacity issues, as there will continue to be disruption within certain marketplaces. Strong companies will be in a position to pick up a solid book of business. -- The formation of new insurance organizations and a declining success rate of these new ventures as market conditions begin to soften. BestWeek subscribers can download a free printed copy of the full 24-page special report, "Keeping Pace," and a spreadsheet file of the report data at www.bestweek.com. Nonsubscribers can download a printed copy of the full 24-page special report for $75 or a combination of the printed report plus a spreadsheet file of the report data for $200 at www.bestweek.com. Call customer service for more information, (908) 439-2200, ext. 5742. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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