The aggregate underwriting loss for domestic reinsurers fell from $6.44 billion in 2002 to only $563.51 million for 2003. As a result, overall net income for U.S. reinsurers jumped to $3.08 billion in 2003, nearly five times the $628.39 million reported by a similar group in 2002.

Reinsurer policyholder surplus also grew substantially, reaching $55.92 billion last year, compared with $42.08 billion in 2002, according to RAA, which tallied the statutory underwriting results of 29 U.S. property-casualty reinsurers.

Joseph Sieverling, vice president at the Washington-based RAA, said 2003's aggregate combined ratio reflects a drastically improved loss ratio of 74 (compared to 93.7 in 2002), along with a 27.2 expense ratio (down from 27.6).

“The whole decrease in the combined ratio is due to a better loss experience and that is clearly in line with everyone's expectations,” he said.

Reinsurers have become more selective in the risks they accept, he said, adding that “terms and conditions of the contracts have tightened substantially, and the rates have gone up.”

However, despite a 20.1 point improvement in the aggregate combined ratio, one troubling sign is that reinsurers posted lackluster growth in net premiums written last year. The 29 U.S. reinsurers surveyed reported $30.63 billion in net premiums written for 2003up less than 4 percent from the $29.5 billion posted the year before.

“It increased by about a billion dollars in 2003, which is a relatively small increase compared to what we saw from 2001 to 2002, which was about a $5 billion increase,” Mr. Sieverling noted. “I think you could say that rate increases have really slowed or probably came to a stop, or in many lines of business, have reversed.”

In addition, investment income dropped substantially in 2003down nearly 10 percent to $5.62 billion from $6.23 billion in 2002.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 25, 2004. Copyright 2004 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.