CNA Financial, one of the largest US commercial insurers, reported narrowing underwriting margins in the third quarter as loss costs rose in excess casualty and workers’ compensation. That trend matters for Asian insurers and reinsurers with exposure to US liability business.
CNA’s property and casualty combined ratio rose to 97.0% from 92.8% a year earlier. The underlying loss ratio, which excludes catastrophes and reserve development, rose 2.2 points to 64.1%, with increases in every segment. Written rate rose just 2%.
The pressure was sharpest in its US Commercial segment, where the combined ratio rose 7 points to 99.7%. Catastrophe losses, adverse reserve development and a rise in underlying losses in excess casualty and workers’ compensation drove the increase.
“There are areas across many portions of the portfolio where we chose to walk away given current market conditions do not support appropriate pricing, terms and conditions,” said Douglas Worman, chairman and chief executive.
Net income fell to $196 million from $403 million. CNA also took a $137 million after-tax charge from its annual review of run-off long-term care reserves, mainly due to higher-than-expected inflation in care costs.
Several Asian insurers and reinsurers, particularly from Japan, have built significant exposure to the US through acquisitions, specialty platforms and reinsurance. For them, CNA’s results are a reminder that US casualty remains under pressure from social inflation and large jury awards, even as other lines soften.
For reinsurers in the region, rising loss trends at US cedents are likely to support firm casualty reinsurance terms at the January 1 renewals. Reinsurers that grew in US casualty in recent years will be watching their own reserves closely.
CNA’s long-term care charge is also relevant to Asian life insurers. Rising care cost inflation and morbidity have repeatedly forced US insurers to strengthen long-term care reserves, and similar risks apply to long-term care and health products in ageing markets across Asia.
