Industry-wide shift toward under-reserving?
In recent development years, particularly from 2020 to 2024, the reserve-to-paid-loss ratio has trended sharply downward for most insurers. This ratio, which compares carried reserves to cumulative paid losses, helps assess reserve sufficiency by showing how much reserve remains for every dollar already paid in claims. While a ratio below 0.9 isn’t necessarily problematic in isolation, a widespread and sustained decline may indicate that many companies are under-reserving — potentially to boost near-term financial results or due to overly optimistic assumptions about claim development.
