A.M. Best Reports Property/Casualty Rating Downgrades Outpace Upgrades Despite Improved Pricing.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 8, 2002 The property/casualty insurance industry saw an increase in the number of rating downgrades issued by A.M. Best Co. for the second consecutive year, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the special report, "Rating Downgrades Outpace out·pace tr.v. out·paced, out·pac·ing, out·pac·es To surpass or outdo (another), as in speed, growth, or performance. outpace Verb [-pacing, Upgrades Despite Improved Pricing," released by A.M. Best. Rating activity for the property/casualty industry resulted in 1,442 rating actions: 69% affirmations, 24% rating changes (positive and negative) and 7% placed under review during the 12-month period ended July 11. Despite the challenging market conditions, the majority of insurers were able to maintain prior rating levels highlighting the relative capital strength that still exists within the industry. While the property/casualty industry lost a significant amount of capital through insured losses related to the World Trade Center catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). , it was not the trigger for the majority of the rating downgrades issued over the period. The leading culprit, by far, was the adverse development of prior accident-year loss reserves, especially for commercial-lines insurers and reinsurers exposed to long-tailed liability lines, such as workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. and medical malpractice Improper, unskilled, or negligent treatment of a patient by a physician, dentist, nurse, pharmacist, or other health care professional. . Additionally, increased loss costs related to auto-liability claims and the not-yet-realized exposures to mold mold, name for certain multicellular organisms of the various classes of the kingdom Fungi, characteristically having bodies composed of a cottony mycelium. The colors of molds are caused by the spores, which are borne on the mycelium. claims have stretched the reserves of several personal-lines insurers. The magnitude of realized reserve deficiencies reserve deficiency A shortage in funds set aside as a reserve for a specific purpose. For example, during a recession a firm may find the reserve fund covering allowance for bad debts deficient when the amount of bad debts exceeds expectations. is, in some cases, staggering and has led to rapid declines in capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. and A.M. Best ratings for several insurers. The industry's aggregate reserve deficiencies also highlight the recipe for disaster that existed within the marketplace during the mid-to-late 1990s, as companies lowered rates to either gain or maintain market share while an unforeseen increase in loss-cost trends occurred. Over the past year, the number of rating units considered secure -- rated B+ (Very Good) or higher -- decreased from prior-year levels -- to 84.3% of total ratings in 2002, from 85.6% of total ratings in 2001. Additionally, during the recent 12-month period, the number of rating units considered Superior (rated A+ or higher) decreased to account for less than 10% of total ratings for the only time in the recent five-year period. Online Availability BestWeek subscribers can download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. a free printed copy of the full 10-page special report, "Rating Downgrades Outpace Upgrades Despite Improved Pricing," or a combination of the printed report plus a spreadsheet file of the report data for $75 from the A.M. Best Web site, www.bestweek.com. Nonsubscribers can download a printed copy of the full 10-page special report for $50 or a combination of the printed report plus a spreadsheet file of the report data for $125 from the A.M. Best Web site, www.bestweek.com. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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