The Financial Timeline to Impairment

[marindependent]

Just in case you were wondering either why an an FSR rating is important or how long it can take an A rated insurer to become impaired, read this quote:

"“It took an average of 17.0 years for FICs [financially impaired companies] that were initially rated “A++/A+” to become financially impaired, but only an average of 11.4 years for FICs rated “B/B-.” It took an average 9.9 years for the FICs initially rated “D” to become financially impaired."
-please note that I believe they are referring to Financial Strength Ratings.

AM Best Soure Article

 

[Al3x Lee]

The report, Best’s Impairment Rate and Rating Transition Study — 1977 to 2022, added just two property/casualty insurance companies to the list of impaired insurers in 2022, FedNat Insurance Company and Americas Insurance Company. In the previous year, 10 carriers were identified as impaired by AM Best.

Impressive, very nice.. let's see how this list is looking in 12 months

 

[Markthebroker]

The report, Best’s Impairment Rate and Rating Transition Study — 1977 to 2022, added just two property/casualty insurance companies to the list of impaired insurers in 2022, FedNat Insurance Company and Americas Insurance Company. In the previous year, 10 carriers were identified as impaired by AM Best.

Impressive, very nice.. let's see how this list is looking in 12 months

12 months? huh. Amateur. I can get impaired way faster than that.

 

[PrivClientSG]

Just in case you were wondering either why an an FSR rating is important or how long it can take an A rated insurer to become impaired, read this quote:

"“It took an average of 17.0 years for FICs [financially impaired companies] that were initially rated “A++/A+” to become financially impaired, but only an average of 11.4 years for FICs rated “B/B-.” It took an average 9.9 years for the FICs initially rated “D” to become financially impaired."
-please note that I believe they are referring to Financial Strength Ratings.

AM Best Soure Article

I read the article. While it's interesting to see the timeline, timeframe, etc. -- I think what specific companies do will dictate what their own timeline and timeframe is, and I know they can be much faster and far more accelerated if we include potential industry, governmental, tax/accounting changes. I served on a NAIC advisory committee which looked at how companies that used "shadow reserves" (versus companies that didn't) and related strategies would be financially impacted under a variety of scenarios, both financial and otherwise. It also looked at various products and blocks of business and the impact they had on a company under a variety of scenarios.

Personally, I believe drastic changes can potentially occur much quicker based upon a wide variety of circumstances, potential changes, situations, etc.