Alliance: P-C Guaranty Fund Assessments Soars

Alliance: P-C Guaranty Fund Assessments Soars

NU Online News Service, April 17, 3:48 p.m. EDT?Net assessments paid by property-casualty insurers to state p-c guaranty funds have hit a 15-year high, according to a new Alliance of American Insurers study.

In 2001, the latest year with relevant available figures for such a study, payments by private insurers amounted to $735 million. That figure, the Alliance pointed out, is more than twice the $328 million that insurers doled out in 2000 and is second only to the 1987 net assessment of $903 million.

Roger Kenney, associate vice president of research for the Alliance and author of the study, said this rapidly rising assessments are a major concern for insurance companies.

"Unfortunately, I expect them to rise even further in the next couple of years as the result of recent major insolvencies that include those of Reliance, Superior National, California Compensation, PIE Mutual and others," Mr. Kenney said.

These assessments, he said, are particularly insidious because they represent overhead that a company cannot avoid and has absolutely no control over.

The Alliance study, titled "Guaranty Fund Assessments 2001," found that, of the guaranty funds making assessments, seven accounted for 60 percent of the total.

Florida made the largest assessment at $122 million, the study found, followed by California with $115 million. New Jersey, Tennessee, Georgia and Connecticut assessed between $30 million and $60 million each.

The costliest p-c insurance insolvency on record is the Midland Insurance Co. insolvency, with expenditures adding up to $540 million through year-end 2001, the Alliance said. The runner-ups are American Mutual Liability, with expenditures through year-end 2001 of $448 million, and California Compensation, with $383 million.