Guy Carpenter releases 2015 insurance risk benchmarks report

A new report from Guy Carpenter & Company LLC includes an analysis of underwriting performance, reserve development risk and correlation concerns of the United States property & casualty insurance industry.

Guy Carpenter – the reinsurance intermediary of New York City-based Marsh McLennan Companies – released Thursday its 2015 Insurance Risk Benchmarks Report, titled Risk and Opportunity In the year of ORSA: Annual Statistical Review. [click image below to enlarge]

Guy Carpenter’s databases include “financial information for hundreds of companies within the P&C insurance industry over a 36-year period,” Guy Carpenter stated in a release. That includes 1,076 companies and company groups, comprising about 96% of the industry in the U.S.

The report includes research on underwriting performance and volatility, reserve development risk, uncertain liability duration, correlation concerns, expense benchmarking and financial management and strategy.

The report includes a table depicting ultimate loss ratios for 15 different lines – including the long-term mean, five-year mean and the accident year 2014 booked.

It also includes line graphs – depicting different loss ratios since 1980 – for those different lines.

Guy Carpenter also includes market slope statistics for different lines of P&C insurance. The market slope “measures the disparity in results across the companies,” Guy Carpenter noted. “A higher market slope means some companies are performing much better than others,” the firm explained. In this year’s report, the calculation “is the average absolute deviation from median loss ratio across all companies, excluding the 5 percent best- performing and 5 percent worst-performing companies for statistical stability.”

In the section on correlation concerns, Guy Carpenter looks at the correlation between products and across time. That correlation “results from many common risk drivers between insurance policies, including (but not limited to) geographic concentration, exposure to medical inflation, existence of frequency contagion and vulnerability to competitive pricing pressure,” Guy Carpenter noted.

The statistical review “illuminates the market constraints surrounding financial performance for individual companies, such as cyclicality in underwriting pressures, importance of regional segmentation, and uncertainties in product correlation,” stated Tim Gardner, Guy Carpenter’s chief executive officer of U.S. operations, in a press release.