Best’s News & Research Service - January 31, 2025 08:42 AM (EST)
Best’s Special Report: Impairments in US Life/Health Insurance Industry Jump to 10 in 2023
- January 31, 2025 08:42 AM (EST)
//BestWire// - Ten insurance company impairments were identified in the U.S. life/health industry for 2023, following none in 2022, according to a new AM Best report.
The Best’s Special Report, titled, “2023 US Life/Health Impairments Update,” states that during the 2000-2023 study period, 193 life/health insurers became impaired. These impairments consisted of 159 insolvent liquidations, 32 rehabilitations (of which 20 were closed during the period and 12 remain open as of this report) and two conservation actions.
Six of the 10 impairments identified for 2023 were affiliated Friday Health Plans companies that became impaired due to rapid growth during their initial years of operation. The health plans were placed into receivership, and ultimately, liquidation, due to the companies’ reported insolvency and the inability to raise additional funds from outside investors.
For the entire study period, accident and health insurers and health writers accounted for 70% of the impairments, while 14% were small life insurers that focused primarily on selling lower-value industrial/burial policies or stipulated premium business in the South. Remaining impairments involved fraternal entities, annuity writers and other life or combined life/annuity/health business.
The leading cause for impairments in 2000-2023 - where a specific cause could be identified – was the significant challenges of operating as a qualified nonprofit health insurance issuer (known as Co-Ops, or Consumer Operated and Oriented Plans) under the Patient Protection and Affordable Care Act, with 19 impairments. Fraud or alleged fraud was the cause of 15 impairments, while 13 companies failed after experiencing rapid growth.
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=350887.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing 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.