Fitch Publishes Special Report on Michigan Personal Auto Insurance

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has published a special report titled 'Michigan Personal Auto Insurance,' which is available on www.fitchratings.com.

Michigan's approach to automobile insurance is unique relative to other states creating specific underwriting, credit, and regulatory risk exposures for market participants. Michigan is one of only 12 states that operate on a no-fault basis. In no-fault states, policyholders are typically compensated for losses from their own insurer regardless of who is at fault under personal injury protection (PIP) coverage. Michigan is the only state that requires auto insurers to provide unlimited PIP benefits.

Michigan auto insurers reinsure PIP coverage in excess of $530,000 per claim to the Michigan Catastrophic Claims Association (MCCA), a private, nonprofit association created by the state Legislature. MCCA premiums are funded by an annual assessment per insured vehicle currently at $186.

MCCA reported a $410 million statutory surplus deficit at fiscal year-end June 30, 2014. Statutory loss and loss adjustment expense reserves were $17 billion at fiscal year-end 2014, which is after a state permitted practice allowing MCCA to discount reserves by $51.2 billion.

Balances due from MCCA typically represent the highest individual reinsurance recoverable for Michigan auto writers, and a large concentrated credit exposure. In some cases, this recoverable balance exceeds 100% of an insurer's policyholders' surplus.

Calculating business line profitability by state is challenging. On a direct basis, Michigan has the weakest underwriting performance in private passenger automobile insurance of all states from 2012-2014. This result does not reflect losses ceded to MCCA. Reviewing personal auto segment results for companies that write a majority of their auto business in Michigan shows significant underwriting losses over the last five years.

The full report is available on the Fitch web site at 'www.fitchratings.com' under 'Insurance' and 'Research'.

Additional information is available at 'www.fitchratings.com'.

Michigan Personal Auto Insurance (Unique Risks for Insurers)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866195

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View source version on businesswire.com: http://www.businesswire.com/news/home/20150528006090/en/

Fitch Ratings
James B. Auden, CFA
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Fitch Ratings, Inc.
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Chicago, IL 60602
or
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Source: Fitch Ratings

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