Best’s Impairment Rate and Rating Transition Study – 1977 to 2011

OLDWICK, N.J.--(BUSINESS WIRE)-- This is the ninth study conducted by A.M. Best Co. on the long-term impairment rates of A.M. Best-rated, U.S.-domiciled insurance companies. It updates Best’s Impairment Rate and Rating Transition Study – 1977 to 2010, published May 16, 2011.

The study covers the 34 one-year periods from December 31, 1977 to December 31, 2011 and only includes companies that had a Best’s financial strength rating (FSR) over this period. Of the 5,070 individual U.S. companies that carried a Best’s FSR, an average of 21.3 companies per year, or 725 companies, became financially impaired. Impairment, generally defined as any official action by a state regulator that restricts the insurance business activity of an operating insurance company, goes beyond the traditional concept of issuer defaults as discussed later.

Since the last impairment study (which included impairments from 1977 through 2010), eight companies have been added to the list of impaired insurers for 2011, as listed in Exhibit 15. The eight impairments, which were all P/C insurers, is the same number of impairments as in 2010.

The average annual impairment rate for all insurers over the period of this study was 0.67%. Secure companies—with FSRs of B+ (Good) and above—and Vulnerable companies—with FSRs of B (Fair) and below—had average annual impairment rates of 0.24% and 3.73%, respectively.

A.M. Best’s rating transition rates remained stable over the period covered by the study. Among companies with Secure ratings, 98.23% maintained their Secure status over a one-year period. The remaining 1.77% were downgraded to Vulnerable or became impaired over a one-year period.

To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/bestweekreports.asp?rt=ir.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Company
Emmanuel Modu
Vice President – Insurance Linked Securities
908-439-2200, ext. 5356
[email protected]
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
[email protected]
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
[email protected]

Source: A.M. Best Company