Best’s Special Report: US Property/Casualty Industry 2022 Loss & LAE Reserves Slightly Redundant

The U.S. property/casualty (P/C) segment reported its 17th consecutive year of favorable reserve development based on 2022 calendar year results, according to a new AM Best special report. However, the $3.6 billion in favorable reserve development reported for last year was nearly one-third of the level reported in 2021.

The new Best’s Special Report, titled, “U.S. Property/Casualty Industry 2022 Loss & LAE Reserves Slightly Redundant,” states that the P/C industry’s carried reserves at year-end 2022 are redundant by $4.7 billion, or 0.5% of its reported surplus. This amount includes $7.5 billion of asbestos & environmental (A&E) deficiency and $18.1 billion of statutory discount, which is treated as a deficiency from the full value reserves.

From a historical standpoint, the most recent accident year (the period in which those events driving the reserves occur), usually contributes the largest portion of total favorable runoff. However, during calendar year 2022, the largest contribution came from the 2020 accident year, the year most impacted by the COVID-19 pandemic, while a smaller contribution came from the 2021 accident year.

After removing the effects of A&E and discounting, AM Best estimates the industry’s core undiscounted reserves to be redundant by $30.3 billion at year-end 2022. Overall industry reserves as of year-end 2022 are estimated to be $13.3 billion stronger than reserves reported as of year-end 2021. The majority of reserve strengthening occurred in the other/products liability and personal auto liability lines, with reserves weakening in the workers’ compensation line. A&E reserves strengthened by $1.6 billion in 2022, and total core reserves, strengthened by $11.7 billion.

Reserve positions by line of business vary dramatically, ranging from $4.7 billion deficient in commercial auto liability to $11.5 billion redundant in the short-tailed lines, according to the detailed data in the report. The personal auto liability reserves are estimated to be deficient at year-end 2022 by $2.9 billion.

The U.S. P/C industry has faced a number of issues over the past few years—social unrest, social inflation, extreme climate-related events, cyber attacks and an extended shutdown of the global economy due to the COVID-19 pandemic—which made determining year-end reserves challenging. Insurers are currently dealing with not only the ongoing effects of these issues, such as the backlog of claims in the court system, but also new issues such as supply chain shortages, higher-than-anticipated inflation and litigation funding.

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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

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