U.S. insurance company failures both in number and asset value have dropped dramatically in the past year, according to a new report from Standard & Poor's.

Not only has the total count fallen, but asset value of the top five failures last year of $112 million represents a dramatic decrease for the comparable figure of $5.3 billion for the previous year.

“Such favorable trends, however, are not sustainable over the long term,” the report stated.

In addition to developing hurricane losses, the property-casualty sector continues to face increasing price competition, legal issues surrounding certain industry practices and asbestos litigation liability.

The report said it was surprising that the natural catastrophe losses of 2005 have not translated into regulatory action. No property-casualty company domiciled in Louisiana or Mississippi was placed under regulatory supervision last year, it noted.

The number of p-c failures decreased to 10 in 2005 from 13 in the previous year. But that sector kept its percentage of industry failures in the traditional 60-to-65 percent range.

The largest p-c failure last year was Cornerstone Mutual Insurance Co., with assets of $29 million at year-end 2004.

Commercial lines writers ended the year with a greater statutory surplus than the previous year, the report said. But poor catastrophe modeling capabilities led to some carriers not accurately capturing loss expectations, according to S&P.

Special Reports /

Insurer Failures Dip To New Low

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