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| Steve:
The public very seldom hears about insurance company insolvency but unfortunately it does happen. The insurance industry media has numerous citations of company insolvency. Here is a story about an Illinois company. The most famous insolvency story is the financial impact of the 1992 Hurricane Andrew had on State Farm - Bloomington, IL the largest property insurer in the US.
The 2011 tornadoes in Joplin MO made three companies insolvent. I think the Hurricane Andrew State Farm story makes the point that insurance companies become insolvent by natural disasters.
From the State Farm's Presidents address:
State Farm Fire and Casualty Company paid nearly $4 billion to its Florida customers for
their property damages arising from Andrew. At the time, that exceeded the Fire and
Casualty Company’s entire net worth, which had been accumulated since its inception in
1935 from its earnings throughout the United States and Canada. Stated differently, in
addition to causing the insolvency of several insurers that never recovered, in one day
Hurricane Andrew depleted all of the earnings that had been accumulated for the
protection of policyholders by the largest property insurer in the U.S. Without the
financial support provided at that time by State Farm Mutual, the Fire & Casualty
Company would have had to discontinue offering property insurance coverage to its
customers not only in Florida, but also throughout the rest of the country, leaving
millions of homeowners without coverage.
Link:
http://www.statefarm.com/florida/jtstatement.pdf | |
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Crop Insurance Companies Going Bankrupt?
