Eight life and health insurance companies became insolvent in 1996, up from two the previous year, according to Standard & Poor's Insurance Rating Services.
In recent years, insolvencies have been on the decline from 17 in 1993.
The New York-based rating agency said a third of the 1,563 life/health insurance companies it tracks have vulnerable ratings, ranging from BB to CC. However, those companies represent just $57 billion, or 3%, of the market's $1.9 trillion of assets. The bulk of the industry's assets are represented by companies with secure ratings of AAA to BBB, it said.
In its annual rating profile of life/health insurers, the agency found that industry mergers and acquisitions have resulted in "greater efficiencies in back office and distribution costs." The industry also has benefited from healthy balance sheets and a relatively low interest rate environment, the agency said.
Standard & Poor's affirmed 64% of its ratings of life/health insurers' "claims-paying ability" in 1996. Of the remaining ratings, 16% were upgraded and 20% were downgraded.