Certain statements in this document are “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements are made pursuant to the safe harbor provisions of the PSLRA and include statements regarding our loss reserve and reinsurance recoverable estimates; the impact of future catastrophes (including acts of terrorism); asbestos and toxic waste liability developments; the number and severity of surety-related claims; the impact of changes to our reinsurance program in 2009 and the cost of reinsurance in 2010; the adequacy of the rates at which we renewed and wrote new business; premium volume and competition in 2010; property and casualty investment income during 2010; cash flows generated by our fixed income investments; currency rate fluctuations; estimates with respect to our credit derivatives exposure; the repurchase of common stock under our share repurchase program; our capital adequacy and funding of liquidity needs; the funding and timing of loss payments; and the redemption of our capital securities. Forward-looking statements are made based upon management’s current expectations and beliefs concerning trends and future developments and their potential effects on us. These statements are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties, which include, among others, those discussed or identified from time to time in our public filings with the Securities and Exchange Commission and those associated with:
Premium growth was adversely impacted in 2009 and 2008, but more so in 2009, by the general downturn in the economy which began in 2008 and continued throughout 2009. The amounts of coverage purchased or the insured exposures, both of which are bases upon which we calculate the premiums we charge, were down in 2009 in many classes of our business. Also, in both years, our ability to grow premiums was constrained by our continued emphasis on underwriting discipline in a highly competitive market environment. During 2008, rates were under competitive pressure and generally decreased, with variation by class of business and geographic area. In 2009, competitive pressures continued but rates in the commercial and professional liability businesses increased slightly overall.
For any catastrophe losses, we are subject to certain coinsurance requirements that affect the interaction of some elements of our catastrophe reinsurance program.
Retention levels in the professional liability classes remained strong over the last three years. New business volume declined in each of the past two years, but more so in 2009, due in varying degrees to the competition in the marketplace as well as the effects of the economic downturn. While we obtained new business in 2009, including some as a result of the market dislocation in the insurance industry, the overall volume of new business was down from 2008. This decline was due to the decrease in the demand for insurance resulting from the economic downturn. We maintained our focus on small and middle market publicly traded and privately held companies and our commitment to maintaining underwriting discipline in this environment. We continued to obtain what we believe are acceptable rates and appropriate terms and conditions on both new business and renewals.
We experienced favorable development of about $390 million in the professional liability classes other than fidelity, including about $150 million outside the U.S. Favorable development occurred in each of the primary professional liability classes, including directors and officers liability, errors and omissions liability, fiduciary liability and employment practices liability. A majority of this favorable development was in the 2004 and 2005 accident years. Reported loss activity related to these accident years was less than expected, reflecting a favorable business climate, lower policy limits and better terms and conditions. As these years became increasingly mature, and as the reported loss experience emerged better than we expected, we gradually decreased the expected loss ratios for these accident years.
In Item 1 of this report, we present an analysis of our consolidated loss reserve development on a calendar year basis for each of the ten years prior to 2009. The variability in reserve development over the ten year period illustrates the uncertainty of the loss reserving process. Conditions and trends that have affected reserve development in the past will not necessarily recur in the future. It is not appropriate to extrapolate future favorable or unfavorable reserve development based on amounts experienced in prior years.
There is typically no stated contractual commitment associated with property and casualty insurance loss reserves. The obligation to pay a claim arises only when a covered loss event occurs and a settlement is reached. The vast majority of our loss reserves relate to claims for which settlements have not yet been reached. Our loss reserves therefore represent estimates of future payments. These estimates are dependent on the outcome of claim settlements that will occur over many years. Accordingly, the payment of the loss reserves is not fixed as to either amount or timing. The estimate of the timing of future payments is based on our historical loss payment patterns. The ultimate amount and timing of loss payments will likely differ from our estimate and the differences could be material. We expect that these loss payments will be funded, in large part, by future cash receipts from operations.
The Corporation does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the Corporation’s financial condition, results of operations, liquidity or capital resources, other than as disclosed in Note (16) of the Notes to Consolidated Financial Statements.