Rating agency AM Best identified thirteen new insurance company impairments in the US property and casualty (P&C) industry in 2019, which was two more than in the previous year.
A new report found that four impairments of medical professional liability writers and another four commercial auto writers led the 2019 impairments.
Overall, from 2000 to 2019, 388 property/casualty insurers became impaired, with 314 insolvent liquidations and 74 rehabilitations, of which 37 were closed during the period.
Primary line of business details was determined for 380 of the 388 impairments as well, and for these 380 impairments, the leading line of business was workers’ compensation, which accounted for 26% of the impairments.
AM Best defines impairments 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 are not considered impairments, unless delays or limitations were placed on policyholder payments.
After workers’ compensation, personal lines insurers accounted for 28% of all impairments, split between private passenger auto (19%) and homeowners (9%).
AM Best also determined that commercial lines insurers accounted for 22%, split between other liability/commercial multi-peril (14%) and commercial auto (8%), with the remaining 24% in specialty lines.
There were specific causes identified for 96 of the impairments, 24 of which were related to fraud and 22 of which were related primarily to affiliate problems.
Catastrophe losses caused 21 impairments, while 16 companies became impaired after experiencing rapid growth.
Investment losses were a significant factor in 11 impairments and one insurer became impaired because of reinsurance failure, while another was placed into liquidation after marketing warranty insurance products without a license.
Furthermore, AM Best found that the rise in risk retention group (RRG) impairments in recent years continued in 2019, accounting for three of the 13 impairments.
