Insurer financial impairments triple since 2007: Best
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U.S. property/casualty insurance company financial impairments more than tripled since 2007, according to a report released Tuesday by Oldwick, N.J.-based A.M. Best Co. Inc.
The number of financially impaired property/casualty insurers rose to 18 last year, up from 16 in 2008 and only five in 2007, the last full year before the recession began, according to the rating agency.
A financially impaired insurer is a company that has had an official action taken against it by regulators in a state in which its does business. State actions include anything that restricts the company's ability to conduct business normally, even though the company technically might not be insolvent.
Best identified four impairments so far this year, but the study adds that “the full development of 2009 and 2010 impairments may not be evident for some time.”
The study says most of last year's impairments arose from underreserving, underpricing and too-rapid growth in the years immediately before impairment.
Last year, impairments included six homeowners and residential insurers, four workers compensation insurers and four commercial automobile liability insurers. The other four impairments were a financial guarantee insurer, a medical professional liability insurer, a private passenger nonstandard auto insurer and a title insurer.
Best predicts impairments will increase as “insurers absorb ongoing underwriting and investment losses, and as regulators take control of companies for which they have been unable to find buyers.”
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