U.S. Carrier Failures At 10-Year Low

Insurance company failures in the United States fell to the lowest point seen in the past decade thanks to improved earnings, lower levels of net loss reserve deficiencies and continued focus on underwriting discipline, according to a report released by Standard & Poor's.

In its report, "U.S. Insurer Failures Maintain Downward Trend in 2006," the New York-based rating service said a total of 11 companies fell into regulatory supervision in 2006. The trend has improved since a high of more than 50 company failures in 2000.

In 2005, 16 companies failed, and in 2004 the figure stood at 19. Property-casualty companies historically lead failures, a total of 73 percent in 2006, compared with a 10-year average of 60 percent, S&P said.

S&P noted that 2006 marked the lowest number of p-c failures in the past 10 years with eight. For 2005, failures stood at 10, and at 13 in 2004.

The largest failure in 2006 was Vesta Fire Insurance Corp. and its affiliates by total assets of $432 million in 2005, S&P said.

S&P said its outlook for the p-c sector is stable. The combined ratio is expected to be between 94 and 95 for 2007.

On the commercial lines side, "industrywide loss reserve levels for accident years 2001 and prior continue to generate deficiencies with the more recent accident years helping to mitigate the full earnings impact," S&P said. "This continues to be an area of analytical concern."

Personal lines are expected to be stable. However, "further enhancements in risk management, as well as sustained prudent underwriting practices, will be necessary for personal lines to maintain their operating strength," S&P said.

A copy of the full report is available for purchase by sending an e-mail to research_request@standardandpoors.com.