Releasing reserves based on early developments is an optimist’s view, [Evan Greenberg, chairman and chief executive officer of ACE Limited] said. “Good news comes early in the casualty business. The bad news always comes late,” he said.

“I do think some companies have released reserves early in an effort to goose earnings,” he said. “It may come back to bite them.”

As discussed in my prior post P&C fundamentals are pretty bad. According to reports, the only way that insurers showed profits in recent periods was by playing games with their reserves. That is, they revised downward their view of prospective losses to allow them to release reserves, improving the bottom line (on paper, anyway). Such releases covered up “a multitude of sins.”

A report of a Standard & Poor’s June conference on the subject is enlightening and alarming:
Continue Reading When will the chickens come home to roost? Insurers Use Reserve Releases to Buff Up Underwhelming Financials