Demotech's Response to Concerns About P&C Industry Loss and Loss Adjustment Expense Reserve Adequacy Remains in Place

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Aug 20, 2024, 15:56 ET

COLUMBUS, Ohio, Aug. 20, 2024 /PRNewswire/ -- Over the past few weeks, articles in insurance trade publications have questioned the adequacy of the P&C industry's loss and loss adjustment expense (L&LAE) reserves. Fortunately, since 2018, Demotech has had in place SPEQUELLAE, the first widely distributed metric to quantify the quality of pretax statutory earnings reported by carrier management, by contrasting each carrier's emerging estimates of prior L&LAE reserves to their current estimates. A SPEQUELLAE index of 100 or higher indicates that management historically addressed the integrity of its reported L&LAE reserves, and therefore, future pretax statutory earnings will not be impacted by adverse development of historical L&LAE reserves.

SPEQUELLAE is Demotech's acronym for:

Statutory
Pretax
Earnings
Quality
Using
Emerging
Loss and
Loss Adjustment Expense
Estimates.

Recognizing that no metric is perfect, the power and objectivity of SPEQUELLAE as an index of the quality of L&LAE reserves and, therefore, statutory pretax earnings is that it is simple to calculate, fairly objective, and utilizes publicly available financial data prepared by the carrier.

The SPEQUELLAE index of virtually all P&C insurance companies can be viewed at no cost by visiting www.demotech.com and searching for the carrier by name.

About Demotech, Inc.
Demotech, Inc. is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Since 1985, Demotech has served the insurance industry by assigning Financial Stability Ratings^®(FSRs). Demotech's philosophy is to review and evaluate insurers based on their area of focus and execution of their business model rather than on financial size. Demotech was the first to review and rate independent regional and specialty Property and Casualty insurers. Demotech's consistently expanding list of accreditations and acceptances has resulted in rating and reviewing 440 insurers operating in the US. As of July 11, 2022, Demotech, Inc. is registered with the U.S. Securities and Exchange Commission as a nationally recognized statistical rating organization (NRSRO) in the class of ratings for insurance companies. Learn more at www.demotech.com.

SOURCE Demotech, Inc.