Will the Rising Loss Ratio Trend Continue?

By Joseph M. Izzo April 30, 2013

Two years have passed since the inaugural release of the ISO Casualty Index. In that time, we've published eight quarterly updates that include loss ratio and loss emergence data for the ten general liability and commercial auto segments.

With each release, we were able to confirm and speculate about emerging and current trends within those lines of business and track the industry's position on the underwriting cycle. Since 2005, with few exceptions, the general liability and commercial auto segments have exhibited increasing loss ratios. Speculation continues on when the market will turn again, but so far the index has confirmed the rising loss ratios. Our next release will include the first glimpse of 2012. Will this loss ratio trend continue?

Our trend investigation is less telling with regard to loss emergence data. We see less of a general pattern. Rather, trends for claims handling, payment, and reporting are more likely to differ by segment. 

The primary uses of the ISO Casualty Index include benchmarking against the ISO aggregate, tracking the underwriting cycle, and identifying market trends. Many ISO products allow for those applications, but the index is one of the quickest products to market for customers using ISO statistical data. And beyond such traditional applications, the index lends itself to new and innovative uses within the capital markets space.

We believe the product can help you manage adverse casualty loss experience by giving you information you need to transfer risk to the capital markets. Issuers and purchasers of insurance-linked securities widely use property indices to trigger those instruments. The capital markets currently lack a comparable index in the casualty space. We hope the ISO Casualty Index can fill the void — and a casualty-based trigger using the index isn't too far in the future. We're excited by market feedback and look forward to a casualty deal.

Our next release is set for May 31, 2013. Visit our blog soon after for an update.


Joe Izzo

Joseph M. Izzo is senior vice president of ISO's Data Assets and Analytics Department. Mr. Izzo has more than 28 years of actuarial and data management experience. His division is responsible for various products and services related to ISO’s commercial lines insurance programs.