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Best’s Special Report: Best’s Impairment Rate and Rating Transition Study — 1977 to 2022

AM Best’s latest special report on the long-term impairment rates of U.S.-domiciled insurance companies states that two insurance companies were added to the list of impaired insurers in 2022, down from 10 carriers identified in the previous year.

The Best’s Special Report, titled, “Best’s Impairment Rate and Rating Transition Study — 1977 to 2022,” marks AM Best’s 20th study and is aimed at estimating the risk of impairment of U.S. insurers. The analysis covers 45 one-year periods from Dec. 31, 1977, to Dec. 31, 2022, and includes U.S. insurers that had at least one Financial Strength Rating (FSR) or one corresponding Long-Term Issuer Credit Rating (ICR) during the study period.

The pair of 2022 impairments were property/casualty companies. One company, domiciled in Florida, became impaired due to hurricane-related losses and high claims litigation and suspected roof replacement fraud. The other, a Louisiana-domiciled company, became impaired following losses from hurricanes Ida, Laura, Delta and Zeta. Since the start of 2021, 14 companies, including AM Best-rated and non-AM Best-rated companies, have become impaired due to natural catastrophes. All were domiciled in Florida or Louisiana. The increase in frequency and severity of catastrophe events, especially secondary perils, according to the report, clearly has pressured more insurers in recent years.

Categories of impairment discussed in the report include:

  • Gross impairments, which encompass the broadest definition of impairment and include companies that AM Best has ceased rating by the time of impairment. Gross impairments reduce cohorts of insurance carriers by withdrawn ratings, thus further boosting impairment rates; and
  • Net impairments, which represent gross impairments, except that insurers that became impaired after rating withdrawal are not counted, and cohorts of insurers are not reduced for withdrawn ratings.

The report also addresses the issues related to comparing the AM Best impairment study with corporate default studies of other major Nationally Recognized Statistical Rating Organizations (NRSRO). These corporate default studies primarily reflect the defaults associated with senior unsecured debt obligations or their proxies. The report emphasizes that any comparisons between AM Best’s impairment studies and the corporate default studies of those NRSROs should be based on AM Best’s holding company ICRs or their proxies, which are effectively equivalent to AM Best’s senior unsecured issue credit ratings.

To access a copy of this report, please visit

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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