In its quarterly survey of 30 reinsurers statutory underwriting results, the Reinsurance Association of America said the loss ratio portion of the 2002 combined ratio was 93.7, while the expense ratio was 27.6. The ratios compare with a loss ratio of 111.8 and a 29.7 expense ratio reported in 2001 for a similar group of reinsurers.

During 2002, the group of U.S. reinsurers wrote $29.5 billion of net premiums compared to $26.5 billion for 2001, according to the associations statistics.

While hardening rates and tighter terms and conditions are starting to improve accident year results, Laline Carvalho, a director for Standard & Poors, said more work needs to be done. “The companies are not anywhere close to where they need to be to achieve decent returns-on-equity for their investors.”

As a result, she thought more double- digit rate increases were needed in 2003 and 2004, as well as further tightening in terms and conditions. “The question remains as to whats going to happen to the market after that. Youve got a very short window of time to make up for all the sins of the past.”

Further, theres probably more bad news to come in the reserving area, which will offset some of the good news on pricing and better terms and conditions, she said.

Although companies have done a lot of reserve strengthening in 2002, the question is whether they have fully accounted for the losses that are flowing through the primary markets, “which will eventually hit reinsurers,” Ms. Carvalho said. She noted that many primary companies have boosted reserves for asbestos and other losses incurred during the height of the soft market, between 1997 and 2001.

“The primary companies, particularly in the area of asbestos, seem to be throwing up their hands and saying, Were going to finally admit to a substantial amount of loss” in order to put the problem behind them, said Steven Dreyer, insurance practice leader at S&P in New York. Not long ago, he said, these companies would have denied liability for these asbestos claims.

“The challenges of the mid-to-late 1990s underwriting years continued, in 2002, to affect the industry,” acknowledged Dean Davison, a representative for Employers Reinsurance Corp., which last year put up $3.4 billion in reserves on a pre-tax basis.

“As we saw the new data from claims, we took necessary actions to boost our reserves. So thats reflected in our poor financial results for 2002,” he said. “The 2002 accident year appears to be coming in solid, as the actions to improve underwriting of the last couple of years start to take hold. But it hasnt been enough yet to overcome the challenges of the past.”

However, he said the company is looking forward to improving results in 2003. “Weve had continued progress in our underwriting. Weve had significant improvements in pricing, terms and conditions over the last two years.”

The RAA results for a representative sampling of individual companies follow alphabetically:

American Re-Insurance Co. reported a combined ratio of 291.5 and net premiums of $1.2 billion for 2002. The companys 2001 combined ratio was 148.3.
Axa Corporation Solutions Reinsurance Co. reported a combined ratio of 102.1 in 2002, 129.8 in 2001.
Berkley Insurance Co. reported a combined ratio of 100.3 in 2002, 148.9 in 2001.
CNA Re had a combined ratio of 107.9 in 2002 and 247.8 in 2001.
Converium Reinsurance (North America) had a combined ratio of 112.6 in 2002 and 170.6 in 2001;
Employers Reinsurance Corp., with net written premiums of $4.5 billion in 2002, had a 2002 combined ratio of 163.8 and a 2001 combined ratio of 131.4.
Everest Reinsurance Co. had a combined ratio of 98.8 in 2002; 116.3 in 2001.
Folksamerica Reinsurance Co. had a combined ratio of 99.2 in 2002; 119.9 in 2001.
General Re Group, with net written premiums of close to $4.0 billion, had a combined ratio of 125.6 in 2002 and 175.2 in 2001.
Gerling Global Reinsurance Corp. of Americawhich has been put into run-offhad a 149.7 combined ratio in 2002, compared to 130.8 in 2001;
Hartford Re had a combined ratio of 107.1 in 2002 and 143.9 in 2001.
National Indemnity, with net premiums totaling $2.7 billion, had a combined ratio of 54.0 in 2002. (National Indemnitys figures were included in Berkshire Hathaway Group reporting in 2001. Berkshire Hathaway had a combined ratio of 123.8.)
Odyssey America Re Corp./Odyssey Re Corp. had a combined ratio of 98.3 in 2002 and 113.9 in 2001.
Overseas Partners U.S. Reinsurance Co. had a combined ratio of 112.6 in 2002 and 120.6 in 2001.
PartnerRe U.S. had a combined ratio of 105.3 in 2002 and 121.6 in 2001.
Platinum Underwriters Reinsuranceformed as a result of a spin-off from The St. Paul Companieshad a combined ratio of 84.6. (The company started writing business in the fourth quarter of 2002.)
PMA Capital had a combined ratio of 108.3 in 2002 and 118.5 in 2001.
PXRE Reinsurance Co. had a combined ratio of 81.2 in 2002; 129.4 in 2001.
QBE Reinsurance Corp. had a combined ratio of 97.5 in 2002; 107.6 in 2001.
SCOR U.S. Group/SCOR Reinsurance Co. had a combined ratio of 111.4 in 2002, compared to 131.2 in 2001.
Swiss Reinsurance America Corp. had a combined ratio of 113.3 in 2002; 141.4 in 2001;
Toa Reinsurance Company of America had a combined ratio of 102.6 in 2002; 124.8 in 2001.
Transatlantic/Putnam Reinsurance Co. had a combined ratio of 102.1 in 2002; 116.0 in 2001.
Trenwick America Reinsurance Corp. had a combined ratio of 134.7 in 2002; 113.7 in 2001.
XL Reinsurance America had a combined ratio of 112.0 in 2002; 161.0 in 2001.

Reproduced from National Underwriter Edition, March 24, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.