Seven new insurer impairments occurred in the U.S. property/casualty industry in 2017, with risk retention group impairments on the rise in recent years, according to a new report by A.M. Best Co. Inc.

By comparison, there were 14 impairments in 2016 when 11 members of the Tower Group became impaired, according to the Oldwick, New Jersey-based rating agency’s report released on Monday.

Impairments are defined by Best as situations in which a company has been placed, via court order, into conservation, rehabilitation or insolvent liquidation. Supervisory actions undertaken by insurance department regulators without court order were not considered impairments unless delays or limitations were placed on policyholder payments.

Overall, 362 property/casualty insurers became impaired from 2000 to 2017, consisting of 287 insolvent liquidations and 75 rehabilitations – 31 of which were closed during the period while 44 remain open at the time of the report.

There has been an overall rise of risk retention group impairments over that time, resulting in RRGs representing the second highest number of impairments by organizational type behind stock companies, according to the report. Overall, there were 37 RRG impairments, representing 10% of the total. But looking at RRG impairments through time bands shows that RRGs were 4% of impairments in years 2000-2005, 12% of impairments in years 2006-2010, 18% of impairments during years 2011-2015, and 19% of impairments during years 2016-2017.

“To some extent, the growth in RRG impairments reflects the growth in popularity of this structure,” the report stated. “Another significant factor, however, may be business plans with unrealistic loss, operating expense, and pricing assumptions being utilized as these self-insurance entities are formed and undertake operations.”

Primary line of business details were determined for 353 of the 362 impairments, with workers compensation accounting for 26% of the impairments during the period, according to the report.

Specific causal factors were identified for 92 of the impairments, with fraud or alleged fraud the leading specific cause, present in 24 of the impairments, while 21 impairments related primarily to affiliate problems. Catastrophe losses, largely in Florida and Texas, caused 18 impairments, while 16 companies suffered impairment after experiencing rapid growth, according to the report.

“While there are specific causal factors identified for some of the impairments, most of these situations fall into the category of general business failure arising out of some combination of poor strategic direction, weak operations, internal controls weaknesses, and/or underpricing and under reserving of the business,” the company said in its report.