Workers comp sector leads in insurer financial impairments: BestReprints
The U.S. workers compensation industry experienced more financial impairments during a 17-year period from 2000-2016 than any other property/casualty line of business, according to an A.M. Best Co. Inc. special report released Tuesday.
Overall, 354 property/casualty insurers became impaired during the study period.
According to the study, the workers compensation sector accounted for 26% of the impairments; commercial lines insurers represented 22% of the impairments, split between other liability/commercial multi-peril at 15% and commercial auto at 7%; and 23% of impairments were split among specialty lines. The remaining sectors accounted for personal lines.
Best defines impairments as being situations in which a company has been placed, via court order, into conservation, rehabilitation and/or insolvent liquidation. Supervisory actions undertaken by insurance department regulators without court order were not considered impairments for this study unless delays or limitations were placed on policyholder payments, Best said in a statement.
Specific causal factors were identified for 91 of the impairments, with fraud or alleged fraud the leading cause and present in 23 of the impairments, while 21 impairments related primarily to affiliate problems. Catastrophe losses, largely in Florida and Texas, were responsible for 18 impairments, while 16 companies suffered impairment after experiencing rapid growth, the according to the statement.
Of the 354 impaired companies during the period, 45% were rated by Best at some point during the period between the date of impairment and three prior year-ends. The study concludes that there has been a significant decline in the number of impairments that Best has been involved in rating in recent years. From 2007-2016, there were 174 U. S. property/casualty impairments, of which 21% were rated by Best at a point during the period between date of impairment and three prior year-ends, compared with 45% for the 2000-2016 period, according to the statement.