Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • July 2016
07

Non-life insurers release the most reserves in 30 years

Open-access content Wednesday 20th July 2016 — updated 5.50pm, Wednesday 29th April 2020

Financial reserves released by general insurers in 2015 have been the highest in the past 30 years, according to a letter published by the Prudential Regulatory Authority (PRA).

2


Addressed to UK insurance CEOs, the letter said this was measured by the percentage of reserves based on a PRA analysis of regulatory returns. 

The PRA's general insurance director Chris Moulder said: "Inevitably this raises the question as to whether these reserve releases are sustainable."

The PRA did not identify a single trend to explain the increase in reserve releases, but outlined a number of possible reasons.

These include: insurers' one-off exercises to clear out any excess reserves left in accounts from previous years; a movement more towards best estimate basis; pressure to maintain a certain level of profitability; and speeding up in the reporting and settlement of claims, reflecting improvements in claims processes.

The regulator acknowledged these factors could speed up claims settlements, but Moulder added: "We would also expect insurers to understand how much credit is being taken for these trends - noting that not all of these may yield the benefits anticipated."

The PRA also looked at how firms estimated future claims inflation assumptions implied by book reserves. In several cases, it found that the implied future claims inflation was lower than that indicated in the historic data. 

In an extreme case, the regulator estimated the historic claims inflation to be 5% per year, but to obtain the insurer's booked reserves would imply an assumption of -2%. 

"This would suggest that if the future trend is in fact in line with past inflation, booked reserves would need to be 25% higher than currently assumed," Moulder said. 

He added: "We expect insurers to consider the impact of a range of inflationary assumptions so that boards are able to understand the sensitivities in this area."

The regulator will continue to look into the issue. For Lloyd's syndicates, the PRA also identified some common trends for specific lines but added Lloyd's would conduct their own review. 

This article appeared in our July 2016 issue of The Actuary.
Click here to view this issue
Filed in:
07
Topics:
General Insurance

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Underwriting Risk Manager

London (Central)
£85K-£95K + Benefits
Reference
124386

Reserving Manager (Contract)

London (Central)
£1200 - £1400 per day
Reference
124385

Life Actuary - Contract - IFRS 17 Financial Impact

England, London / England, Bristol / North Yorkshire, England
£900 - £1150 per day
Reference
124384
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2022 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ