Summary: In response to a congressional request, GAO provided information on property/casualty insurance company insolvencies, specifically the: (1) incidence of insolvencies; (2) characteristics of selected insolvent companies; and (3) system of state guarantee funds established to pay claims against insolvent insurance companies.
GAO found that: (1) the incidence of insolvencies has generally followed the profitability cycle of the property/casualty insurance industry, and has been geographically widespread; (2) there were about 140 insolvencies from 1969 through 1986, 42 percent of which occurred after 1983; (3) the number of companies designated for regulatory attention due to troubling financial conditions increased from 132 in 1978 to 590 in 1986; (4) insolvencies in the late 1960's and 1970's generally could be attributed to companies that were small, handled mostly automobile insurance, and operated in one state or on a regional basis; and (5) there were no characteristics or trends common to the companies that were liquidated from 1977 through 1986. GAO also found that: (1) claims against insolvent insurers are paid from assessments states levy on the companies they license; (2) there is considerable variation in states' administration of such funds; and (3) inconsistencies in state fund laws have caused confusion and conflict and raised questions on whether the state-by-state approach is appropriate.
