Insolvency most often pinned to insufficient loss reserves.The U.S. property/casualty industry in the past decade has shown resiliency and improved risk management amid extraordinary events. Since 1969, this business segment has experienced wide fluctuations in annual impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. rates, 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. "Best's Insolvency Study, Property/Casualty U.S. Insurers, 1969 to 2002." The common denominator common denominator n. 1. Mathematics A quantity into which all the denominators of a set of fractions may be divided without a remainder. 2. A commonly shared theme or trait. among those financial impairments is a diminished operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. , with impairment peaks often triggered or exacerbated by external factors affecting underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. or investment results. Still, despite recent near-term peaks in impairment rates, such events remain relatively rates, according to the A.M. Best Co. special report, which analyzes what led to the financial impairment of 871 insurers. [GRAPHIC OMITTED] Primary Causes of P/C Impairments (1991 to 2002) Deficient Loss Reserves 48% Rapid Growth 11.7% Alleged Fraud 7% Overstated Assets 5.1% Significant/Change 0.8% Reinsurance Failure 0% Catastrophe Losses 8.2% Impairment of an Affiliate 7.8% Miscellaneous 10.9% Percentage breakout based on 257 of 390 companies in the period where a primary cause of impairment was identified. Sources: State Insurance Departments, A.M. Best Note: Table made from pie chart. |
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