Best’s News & Research Service - December 12, 2017 11:51 AM (EST)
Best’s Special Report: Tower Group Companies Comprise Most U.S. Property/Casualty Impairments in 2016
- December 12, 2017 11:51 AM (EST)
Oldwick //BestWire// - Of the 14 property/casualty impairments identified for 2016, 11 were members of the Tower Group, with the remaining three composed of two medical professional liability risk retention groups and a commercial lines reinsurer, according to a new A.M. Best special report.
The Best’s Special Report, titled, “2016 Property/Casualty Impairments Update,” notes that during a 17-year period from 2000-2016, the U.S. workers’ compensation industry experienced more financial impairments than any other property/casualty line of business. Overall, during the study period, 354 property/casualty insurers became impaired, with line of business details located for 345 of those impairments. The workers’ compensation sector accounted for 26% of the 345 impairments. Personal lines insurers represented 28% of the impairments as well, split between private passenger auto (20%) and homeowners (8%). Private passenger auto can be further categorized as standard and non-standard auto insurers, and represented 12% and 8% of the impairments, respectively. Commercial lines insurers represented 22% of the impairments, split between other liability/commercial multi-peril (15%) and commercial auto (7%). The remaining 23% of impairments were split among specialty lines.
A.M. 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.
Specific causal factors were identified for 91 of the impairments. Fraud or alleged fraud was the leading specific cause and was 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.
Of the 354 impaired companies during the period, 45% were rated by A.M. 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 A.M. 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 A.M. Best at a point during the period between date of impairment and three prior year-ends, compared with 45% for the 2000-2016 period.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=268718 .
To access a copy of the life/health impairments special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=268721 .
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