There were a total of eight property/casualty insurers and one life/health insurance company that became financially impaired in 2013, according to A.M. Best.

Of the nine impaired companies, eight were caused by the combination of deficient loss reserves and inadequate pricing, the rating agency said in a briefing on Monday.

Despite the extent of the industry’s catastrophe losses in the past few years, the eight P/C impairments were about one-third of 2012’s 22—and far below the 25.8 historical average annual number of impairments since 1969, Best said.

On the life/health side, impairment experience for 2013 equaled the all-time low of one impairment reached in 1962.

An exhibit in the briefing lists the nine impaired companies. Scanning the list of impairments for 2013, a reader will see names like Builders Insurance Co., Inc., Nevada Contractors Insurance Co. Inc., United Contractors Insurance Co., Inc. A RRG, Consolidated Workers Risk Retention Group, Inc. and Indemnity Insurance Corp., RRG—raising the questions of whether carriers covering the construction industry or RRGs might have been particularly vulnerable for the second straight year. A similar situation occurred in 2012. (See related article, 17 P/C Insolvencies, Only One Cat-Driven In 2012: A.M. Best.)

This briefing updates the most recent L/H and P/C impairment reviews published in mid-2013. In its 1969-2012 U.S. P/C Impairment Review, published June 24, 2013, A.M. Best noted four 2013 P/C impairments. Since then, four more 2013 P/C impairments have emerged.

The 1969-2012 U.S. Life/Health Impairment Review, published July 8, 2013, reported one 2013 L/H impairment, and no more have emerged.

For the purposes of its analysis, A.M. Best designates an insurer as financially impaired as of the first official regulatory action taken by an insurance department indicating that one or more of the following conditions is true:

  • The carrier’s ability to conduct normal insurance operations is adversely affected
  • Capital and surplus is inadequate to meet legal requirements
  • The carrier’s general financial condition has triggered regulatory concern

According to the latest briefing, three of the 2013 impairments had been rated by A.M. Best Co. at one time, all within the three years leading up to impairment. Of those three, none was rated in the secure range in the year of impairment.

The briefing also notes that the nine-company overall impairment tally for 2013 could increase as information emerges about confidential regulatory actions. As an example, Best notes that an additional company has been added to A.M. Best’s mid-year 2013 tally of 21 impairments for 2012—Regional Health Insurance Co., a RRG. Like the others, Regional Health’s failure is attributed to deficient loss reserves/inadequate pricing.

Source: A.M. Best