Converium has warned that its second quarter results will be impacted by reserve strengthening for its US casualty business.
It said higher than expected losses primarily relating to the 1997 to 2001 underwriting years had caused the need for increased reserving.
Converium said reserves for its US casualty business, particularly umbrella, professional liability, and excess and surplus lines casualty, will be boosted by up to $400m.
This reserve action triggers net impairments of up to $289m of Deferred Tax Assets and $94m of goodwill in the balance sheet of Converium Reinsurance (North America) Inc, said the company.
The reinsurer had announced in April 2004 that first quarter reported losses from prior year US casualty business had exceeded expected loss emergence. At the same time, Converium also stated the expectation that the volatility of longer-tail risks was likely to persist for some time.
It said the adverse loss reporting trend had continued and accelerated in the second quarter of 2004.
The company said its decision to increase reserves should be seen in the context of an ongoing reserve strengthening for prior years at US primary insurance companies, triggered, in part, by the increased pressure for enhanced disclosure.
In response to the loss developments observed in the last quarters, Converium said it had initiated additional reviews of the US casualty business in order to examine the adequacy of prior years' provisions from an integrated actuarial, underwriting and claims perspective.
The reinsurer also said that at the current time the ongoing internal reviews indicated a potential overall reserve shortfall relating to Converium's US casualty business of up to $400m.
Chief executive officer Dirk Lohmann said: “I am personally leading this comprehensive review with the assistance of our actuarial team and members of the newly created Underwriting Technical Services team under Gary Prestia's leadership.
“Let me stress that I am absolutely determined to put an end to this US casualty reserving saga.”
In a move to reassure Converium stakeholders, Lohmann said the company's ongoing business was performing well and that it's performance in the global reinsurance market remained strong.
