August 10, 2010

Amidst all the rosy financial reports from P & C insurers comes this from the latest issue of Best's Review magazine: financial impairments of insurance companies have more than tripled since 2007.

A.M. Best research identified 18 impairments in 2009, up from 16 in 2008 and only five in 2007. Most of the impairments resulted from under reserving and under pricing. Only three were caused by investment problems. Is under-reserving prevalent in insurance company financial reporting? It certainly wouldn't be the first time.

Best predicts the number of financially-impaired companies to rise as they face up to underwriting and investment losses. So far in 2010, they report four impaired companies, although Best says all the 2009 and 2010 casualties likely won't be evident for some time.

George Rothert