Reliance Insurance Company, a 100-year-old institution, declared bankruptcy and is now being liquidated by the Pennsylvania Insurance Department. Household names are going out of business. In the 45 years I've been in business, I've seen between 50 and 100 bankruptcies. Insurance companies can no longer earn enough return on their premiums to offset the above noted issues.

In addition to these pitfalls, insurance companies have suffered severe investment losses in recent years, not only in the stock market: The yield on fixed-income securities is at its lowest point in forty years. Falling on that rug in the beauty salon and bruising an elbow could be litigated into a staggering award by a jury. There is a mentality in America today, spawned, in large, part by unscrupulous lawyers, that an accident or an injury creates the opportunity to hit the jackpot against the insurance company. Workers' compensation losses have risen far beyond predictions, in large part because of malingering and fraudulent claims that purport that workers are unable to return to their jobs or any other job. That will cause the downgrading of companies from a rating standpoint. Also, we will see more problems in the industry because companies are not adequately reserved for the claims they have on their books. Over the next five to ten years, we will see consolidation continue as companies merge with each other to gain financial strength. It's interesting to note that fewer than five percent of the pooled companies in the insurance industry today are rated A+ by A.M. Best, down from 24 percent five years ago. Instead of sending regulators sporadically, today, they are immediately present with the slightest indication of an unbalanced risk profile. They have stepped up their examination practices.

As for insolvencies, state insurance departments are moving much more quickly. Because of the difficulties companies face today, there has been a movement afoot for the stronger companies to acquire the weaker. Lloyds of London, supposedly an institution of great strength, recently called on its member owners to infuse billions of fresh capital into the company to stay afloat. For example, Mutual Risk, Trenwick, Gerling and PMA Re. The reinsurance industry has seen its fair share of companies go out of business as well. Kemper Insurance Company, Legion Insurance Company and Frontier Insurance Company, once all multi-billion-dollar companies, are out of business, and their insureds are left with contracts of insurance that can't pay on losses.