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Chapter 7
• Identify nature of frequency and severity of insurer
insolvencies
a lot of insolvencies in early 90s and late 80s 1% a year going
solvent generated concern about the quality of state solvency
regulation and the performance of financial rating agencies led
to proposals for federal solvency regulation and to the adoption
of significant changes in state solvency regulation such as risk
based capital requirements ex. Reliance $1Billion cost to
guarantee funds.
• What are the types of solvency ratings
(1) Private companies pay A.M. Best company, Moody’s,
Standard and Poor’s, or Duff and Phelps to obtain a rating
based on the qualitative and statistical analysis of financial
information and management interviews.
(2) Other insurance company are placed in the “rating not
