While other surveys continue to show rates falling, Towers Watson’s CLIPS (Commercial Lines Insurance Pricing Survey) showed rates as flat for the seventh consecutive quarter. Meanwhile, accident year loss ratios are drifting up, the consultancy says:
CLIPS data indicate that accident-year-to-date 2010 loss ratios deteriorated 4% relative to the same period in 2009. This deterioration – based on nine months of information – is marginally higher than an estimated deterioration of 3% for accident-year 2009 over 2008. The higher loss ratios in year-to-date 2010 on an earned basis are driven primarily by higher claim cost inflation indications than those observed in 2009.
Could be. But the industry has been booking calendar year loss ratios around 73% fairly consistently the past few quarters, and by most accounts reserve releases are declining. That would lead one to conclude that Towers Watson thinks the industry is booking inadequate reserves.
Me? I’m sanguine about rate changes – relying on Towers’ own survey – and not too worried about inflation. However, I am worried about low investment returns hurting profitability.