Editor's note: Insurer insolvencies are astronomically expensive. With the Reliance Insurance Cos. insolvency in its fifth year and the Mission Insurance Cos. insolvency taking 21 years to close, this is an issue that is compelling enough to be on the radar screen of any commercial insurance buyer. There is a need for this series to expose and increase awareness of the flaws in the nation's insurance system. This four-part series is not intended to be an indictment of those that work within this system, but simply a recognition that readers could benefit from a system laced with more transparency, accountability and efficiency, whether that system is state-based or federal. This series is also intended to alert readers and commercial buyers who find their insurance company in receivership, and to provide a glimpse of what to expect.
Insurance Insolvencies, Part 1
This first part of the series takes a look at the U.S. system for handling property/casualty insurance failures. It is a system that is failing insurance buyers, particularly commercial insureds, because of systemic problems that lead to excessive costs and extraordinary delays. The article provides a historical perspective on the state insolvency and guaranty-fund systems, helping the reader understand how and why they have evolved over the years--yet have not kept pace over the last three decades with the changing nature of insolvencies.
Insurance Insolvencies, Part 2
The second article in this series will take a look at the treatment of claimants, creditors and other stakeholders and how more complex receiverships under the present system do not serve these constituencies well. Here the systemic shortcomings, redundancies and deficiencies in the current approach will be made apparent, as well as how the lack of political will and the vested interests in the status quo have stood in the way of reform.
Insurance Insolvencies, Part 3
The third article will feature a case study on the failure of a major U.S. insurer. To provide insight, the case will be contrasted with the collapse of the HIH Insurance Group, Australia's second-largest insurer.
Insurance Insolvencies, Part 4
The fourth and final article in the series--to be published in the April 1 issue--will identify and discuss recommendations to make the system more efficient, less costly and more responsive to creditors.
About the authors and Navigant Consulting: Navigant Consulting Inc. is a specialized independent consulting firm providing litigation, financial, health-care, energy and operational consulting services to government agencies and large companies facing the challenges of uncertainty, risk, distress and significant change. The company focuses on industries undergoing substantial regulatory or structural change and on the issues driving these transformations.
*The views expressed in these articles are those of the authors and not Navigant Consulting, its clients or affiliates.
January 1, 2007
Copyright 2007© LRP Publications