PACICC Study Examines Failure of Reliance Insurance Company

The Property and Casualty Insurance Compensation Corporation (PACICC) has
released the latest study in its ongoing Why Insurers Fail research series ‒ “Lessons learned from the
failure of Reliance Insurance Company.”
The study, authored by Vice President, Operations Ian Campbell, examines the 2001 insolvency of
Reliance Insurance Company in the U.S., as well as the implications this had for its Canadian Branch.
The study found that a radical change in the company’s risk appetite following a corporate takeover,
including significant expansion across multiple new product lines and 50 countries, led to the largest
insurance company insolvency in U.S. history, with costs totaling over $4 billion. It also prompted the
first-ever liquidation of a solvent P&C Canadian Branch, requiring PACICC to take a precedent-setting
and “novel approach” to successfully resolve the domestic insolvency.
Says the author, “The goal of our Why Insurers Fail research series is to present interesting stories that
captivate readers, summarize key causes of a notable insolvency and provide important lessons learned
for industry stakeholders. The story of Reliance is very interesting indeed, but also quite tragic. One
positive is the fact that corrective actions taken in Canada resulted in a much better outcome for
policyholders here, compared to those in the U.S.”
Says Alister Campbell, PACICC President and CEO, “The release of this study is very timely. Our
Priority Issue this year is to explore options to expand PACICC’s resolution ‘toolkit’ to deal with
troubled insurers ‒ including possible early intervention measures prior to insolvency and liquidation.
PACICC’s successful, non-traditional approach to address the Reliance insolvency serves to illustrate
the ways that creative resolution alternatives can yield better outcomes for consumers and the industry
as a whole.” And, he adds, “Ian has told this important story really well…I think many people will find
it simply unputdownable!”
Copies of all Why Insurers Fail studies are available on the PACICC website ( Printed
copies of the reports are available upon request.

View Original Press Release


PACICC is the industry-funded, non-profit resolution authority for Canada’s Property and Casualty (P&C) insurance industry. PACICC’s mission is to protect eligible policyholders from undue financial loss in the event that a Member Insurer becomes insolvent. The Corporation works to minimize the costs of insurer insolvencies and seeks to maintain a high level of consumer and business confidence in Canada’s P&C insurance industry through the financial protection it provides to policyholders.

Ian Campbell