The property/casualty industry’s loss reserve position improved slightly in 2013 compared to the previous year, reflecting continued stability in an era of low inflation and slower economic growth, Conning concluded in a new study.

But the insurance research firm’s prognosticators see that stability more likely to diminish in the coming months with the onset of economic challenges such as robust growth or inflation.

“Overall, the industry continues to appear to have sufficient reserves, with a modest degree of safety, under assumptions that claims settlement patterns will continue at their current pace,” Stephan Christiansen, managing director at Conning, said in a statement. He added that that assumption “continues to be [one] of concern” as low inflation and a sluggish economy continue.

“In a stochastic analysis of possible loss payouts across a range of economic scenarios, the possibilities of adverse developments slightly outweigh positive developments,” Christiansen said.

The Conning report, “2013 Property-Casualty Loss Reserves: Still Strong, but Potential Negatives May Outweigh the Positives,” cautions that “loss development patterns and an emergence of claim settlement patterns must be monitored very closely if the industry is to avoid falling into another period of extended reserve deficiencies, as last seen in the first part of the past decade.”

For now, however, news remains generally good. Overall, the property/casualty industry released more than $13 billion in reserves in 2013, Conning said, based on preliminary data, and more than half of that came from auto physical damage, surety, A&H, and financial. If you take $3.4 billion in loss reserves from financial and mortgage guaranty lines out of the equation, the industry released over $10.6 billion in reserves in covered lines in 2013 (from 2012 and earlier), Conning said. This represented more than 2 percent of reserves in 2013, or 2.7 percent of premium, and was the eighth consecutive year of reserve releases.

Here’s a summary of what Conning found, by line, for 2013:

• Private passenger auto liability industry reserves were potentially redundant by 6.3 percent of carried loss reserves, a bit lower than 2012.
• Homeowners loss reserves were redundant at about 5 percent of reserves, down from an estimated 10 percent redundancy in 2012 and an apparent slight deficiency as recently as 2009. The fluctuation came from 2012 and 2011 catastrophes such as hurricanes, which can lead to more uncertain payment patterns, Conning said. Conning is concerned about this line because of economic turmoil, in part, and how it could affect claims emergence.
• Workers compensation industry reserves appear to have ended 2013 slightly redundant by about 1 percent of carried reserves. That compares to an approximate 1.2 percent deficiency of carried loss reserves in 2012.
• Commercial multiperil was deficient by about .3 percent of reserves in 2013, versus a .5 percent deficiency at the end of 2012. Conning saw both numbers as essentially “break-even.”
• Commercial auto liability reached a redundancy at 3 percent of reserves in 2013, versus breaking even in 2012, Conning said.
• Medical professional liability appears to have landed at a redundancy of over 30 percent of carried reserves in 2013, about equal to 2012.

Meanwhile, Conning found that midsized property/casualty companies achieved a redundancy of 5.5 percent of reserves, or 7 percent for the core casualty lines reserved – larger than the industry as a whole. This covered companies that write between $100 million and $2 billion in premium, Conning said.