Last year's strong profits and light catastrophe season saw the rate of impaired insurance carriers at half the historical average for the property-casualty industry, A.M. Best reported.
A total of 15 p-c companies reported impaired status for an average of 1-in-233 companies, Best said.
Two-thirds of the impaired companies came from either the Poe Financial Group or the Vesta Group. "Going into the 2004-2005 hurricane season, these groups were too vulnerable because of rapid growth and poor management to be able to withstand the back-to-back catastrophe losses," the report said.
The 2006 Financially Impaired Companies count of 15 was up two from 2005, although more companies may turn up on the list as more information becomes available, the report noted.
In addition, Florida regulators in January put the Vanguard Fire & Casualty Company in rehabilitation. The company's combined ratios for 2004 and 2005 were 232 and 339, respectively.
The Best report shows the .43 percent impairment rate at half the historical average for the 38 years the rate has been calculated.
"This remarkable trend has been due primarily to the industry's improved capitalization, which kept most companies from getting into trouble after the hurricanes," the report said.
In addition, insurers have been reaping the benefits of price adequacy in casualty lines and significant rate increases in past years in the property business, Best noted.
Also, last year the p-c industry's combined ratio fell to 93.3, the lowest rate in 50 years. "The significant improvement was driven by a 7.9 decrease in the loss and loss-adjustment expense from 2005, which was largely the result of the benign 2006 hurricane season," the report said.
The study also concluded that rapid growth and inadequate loss reserves and pricing have contributed to more than half of the failures for the past four decades.
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