Catastrophe Losses Drove 2021 Property-Casualty Insurer Impairments

A.M. Best identified 17 insurance company impairments in the US property-casualty industry in 2021, with 7 of those associated with catastrophe losses resulting from hurricanes, primarily in Louisiana and Florida.

In an April 5, 2023, Best's Special Report titled "2021 US Property/Casualty Impairments Update," the rating agency said that of the 17 insurance companies that became impaired, 16 were placed into liquidation.

Over a study period from 2000 to 2021, 413 property-casualty insurance companies became impaired, Best said. Those impairments included 348 insolvent liquidations and 64 rehabilitations, 22 of which were closed during the study period with 42 remaining open at the time of Best's report. In addition, there were 57 conservatorships, 56 of which led directly to either the insurer's rehabilitation or liquidation, Best said.

In addition to the five Louisiana-domiciled companies and two Florida-domiciled ones, impairments identified in 2021 included four commercial auto insurers and a pair of Vermont-domiciled risk retention groups, Best said. During the study period, catastrophe losses were the leading cause of impairments with 28, while fraud or alleged fraud was the next-leading primary cause at 25, according to the rating agency.

The rating agency said that of the 413 property-casualty insurers that became impaired between 2000 and 2021, 171 were rated by Best at some point. Best said that in the most recent 10-year period, the number of companies it rated at any point during the 3-year period prior to impairment declined. From 2012 through 2021, 141 US property-casualty insurance companies became impaired, Best said, of which 41—29 percent—were rated by A.M. Best at some point during the period, compared with 41 percent over the longer 2000 to 2021 period.

Best said a report detailing 2022 property-casualty impairments is expected later this year.

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