A catastrophe-laden 2011 and a tornado-filled start to 2012 could have a debilitating impact on smaller carriers, based on the simple premise that they often have a lot smaller of a financial cushion—less business from which to draw and pay claims, analysts say.
When disaster strikes, smaller carriers “can feel the pain more,” says Cliff Gallant, an analyst with Keefe, Bruyette & Woods.
Failures can and do happen. Following the destructive tornado season in 2011 that included widespread devastation in Joplin, Mo., three Barton County Mutual Group companies could not keep up with claims. Regulators got a judge to approve a plan to allow the companies' operations to be merged into the Missouri Farm Bureau.
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