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OLDWICK, N.J.--Fifteen property/casualty insurers became financially impaired in 2006 despite the industry's record-breaking results last year, according to a study by Oldwick, N.J.-based A.M. Best Co. Inc.
But the impairment rate of 1-in-233 companies was half the historical rate for the past 38 years, according to the report, "15 Property/casualty Insurers Identified as Impaired for 2006."
Best designates an insurer as financially impaired as of the first official regulatory action taken by an insurance department, which can include supervision, rehabilitation or liquidation, among other actions.
Two-thirds of the impaired companies were members of either Tampa, Fla.-based Poe Financial Group or Birmingham, Ala.-based Vesta Insurance Group, according to Best. Another property/casualty insurer, Maitland, Fla.-based Vanguard Fire & Casualty Co., was identified as impaired this year.
The report said severe hurricane losses in 2004 and 2005 were the leading cause of impairments for most of the financially impaired companies in 2006.
The overall drop in impairments "has been due primarily to the industry's improved capitalization, which kept most companies from getting into trouble after the hurricanes," said the report.
"Insurers have been reaping the benefits of price adequacy in casualty lines; significant rate increases in past years in the property business; and better underwriting discipline and efficiency gains from years of technological investment," the report said.
In addition, only two life/health insurers became impaired in 2006, according to another Best study, "Two Life/Health Insurance Impairments Identified for 2006; Trends Still Favorable." They were Oklahoma City-based Security General Life Insurance Co., and another company under confidential supervision that was not identified. This represented a new low in the 31 years of Best's life/health impairment studies.