US insurers going bust

Chennai:
14 February 2005

According to a report titled US Insurer Failures Fall To Lowest Level Since 1996, by Standard & Poor's Ratings Services (S&P), the annual number of US insurer failures has been steadily declining since 2000.

This suggests an increasingly favorable environment for insurers in general. However, the extent and consistency of improvement in 2004 was better than expected.

According to S&P, 19 insurance companies were put under regulatory supervision in 2004 compared with 28 in 2003 and 39 in 2002.

The number of property and casualty failures fell to 13 in 2004 compared with 20 in 2003 and 28 in 2002. Property and casualty failures, which historically have made up the bulk of the total count, constituted 68 per cent of total failures in 2004 compared with a 10-year average of 60 per cent.

The number of life failures decreased to three in 2004 compared with five in 2003 and three in 2002. The number of health failures stayed at three in 2004 compared with three in 2003 and eight in 2002.

Of the 19 failed insurers, 17 were not rated by S&P at the time of failure. The remaining two were rated below the secure level ('BBB'), and only one was interactively rated. In 2004, the gap between US insurance company downgrades and upgrades closed significantly relative to 2002-to 90 downgrades versus 60 upgrades for interactively rated companies.