Fitch said that inadequate pricing and unanticipated claims cost increases are in part revealed through loss
reserve deficiencies. The commercial auto liability line has experienced annual unfavorable reserve development totaled greater than 7% of earned premiums for the last four consecutive years (2015-2018).
We've read recently in the press about insurance companies restating their earnings, having to recognize
reserve deficiencies and just in our observations of clients, we're seeing smaller little control failures that aren't leading to any kind of major problems."
Underwriters have executed several rounds of significant underwriting and pricing actions in recent years, but claims severity challenges and
reserve deficiencies limit near-term improvement prospects.
The BSP is also suspending the imposition of penalties on the smaller banks' legal
reserve deficiencies, and is giving a moratorium without penalty on monthly payments due to the BSP for banks with ongoing rehabilitation programs.
Beyond loss severity trends, Fitch also points out that further loss
reserve deficiencies continue to be a problem.
Best expects that Anadolu's technical performance will improve, as the company has addressed the resultant
reserve deficiencies. Additionally, strong rate increases for motor third party liability business are expected to support Anadolu's technical results.
Consolidating financial institutions may also enjoy the following: Relocation of branches/offices within one year in cases of duplication of branches in certain areas; installment payment of outstanding penalties in legal
reserve deficiencies and interest on overdrafts with the BSP over a one-year period; reasonable period to comply with real estate loan limits; restructuring past due obligations with BSP over a 10-year period; concurrent officership between a merged or consolidated bank and another financial institution, and concurrent directorship between banks, and continued effectivity of right or privilege under a rehabilitation program or any special authority granted by the Monetary Board.
These banks will also not be imposed of legal
reserve deficiencies and will be granted a moratorium on monthly payments due to the BSP for banks under rehabilitation.
risk of further
reserve deficiencies at Fondiaria Sai given its history
Henceforth, it was to be made a penalty rate for those banks who chose to borrow from the Federal Reserve to meet temporary
reserve deficiencies as opposed to borrowing in the federal funds market.
Prior year's
reserve deficiencies are now mainly funded.
