General Insurance Article - Reduced reserve releases will pressure insurers profits

 The pace of reserve releases for non-life European insurers will continue to slow into 2013 and beyond as the effects of the general market downturn from 2005-09 continue to play out, says Moody's Investors Service in a new Special Comment published today. Seven consecutive years of reserve releases raises questions as to how much reserve cushioning remains.

 
 The report, "European Insurance: Reduced Reserve Releases Will Add to Profitability Pressures" is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release.

 
 Reserve movements are difficult to predict but are important for future performance. The extent to which reserves develop in line with expectations when first set, can have a material bearing on the future profitability and capital adequacy of (re)insurers.

 
 Moody's says that unfavourable developments in loss reserves can materially impact profitability, and leverage ratios. The more that reserve release income is squeezed, the harder European insurers will need to work to compensate for lower profits through continued expense reductions and rate increases. However, Moody's believes that provided the low inflation environment persists, a repeat of the widespread and severe deterioration in reserves seen in the early part of the 2000s -- which would be broadly credit negative -- is unlikely.

 
 Subscribers can access the report via this link:

 http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_155127