For five consecutive years, property and casualty insurers have released previously held reserves from their balance sheets, accumulating to releases of more than $50 billion in loss and defense and cost containment (DCCE) reserves. This may give the impression that the industry as a whole—with the benefit of hindsight—has been redundantly reserved during these years. But a review of the underlying pattern of releases, in which reserves from more recent coverage years are released and used in part to fund additions to reserves in older coverage years, provides strong evidence that the industry has been deficiently reserved throughout most of its available history.

This article appeared in the November/December 2011 issue of Contingencies, a bimonthly magazine published by the American Academy of Actuaries.