Arrowood Indemnity Company released its second quarter statutory financial statement on August 15, 2023. We have been following the Arrowood saga for several years now and I was surprised to see a slight increase in its policyholder surplus, from $6,474,747 million to $6,716,810. A deeper dive into the financials reveals no significant changes from prior quarters and no change to our previous predictions of Arrowood’s demise.
While insurance companies are constantly monitoring changes in their reserves, the most comprehensive analysis is typically saved for the year-end financials and reflected in the statements filed in March of the following year. Therefore, some volatility is expected quarter to quarter. Diving in, we observed a significant increase in investment income when compared to this time last year along with a decrease in expenses, including in losses and loss adjustment expenses. All of this led to a slight increase in surplus.
The story here is not about a miraculous recovery of any kind. Arrowood’s results do not change our previous musings on their risk profile and near-term insolvency risk. The company continues to face existential risks from sex abuse, opioids, PFAS, talc, and other emerging torts, to say nothing of its exposure to more traditional legacy risks like asbestos and environmental cleanup. Policyholders continue to ask questions regarding Arrowood’s management, too. The fact that Arrowood continues in “solvent” run-off still baffles us as there does not appear to be any real path back to financial health.
We will continue to report Arrowood results as they become available – the next set of financials should be released by November 15th.
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Nick Sochurek has extensive experience in leading complex insurance policy reviews and analysis for a variety of corporate policyholders using relational database technology.
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Trevor Cornell has worked at KCIC since 2012, providing claims management and litigation support for a variety of projects. Trevor has managed insurance coverage disputes, corporate restructuring, various methods of allocation for insurer billing, and in-depth analysis of ongoing litigation. He provides experience modeling economic damages and analyzing insurance company financials in support of expert testimony. Trevor has also assisted in the preparation of financial reporting and litigation forecasts in support of liabilities including, but not limited to, asbestos litigation and personal injury claims.
Through his work experience Trevor has developed a creative set of problem-solving skills to approach his work and is consistently learning and applying new and interesting techniques to provide the best result for KCIC’s clients.
