The number of insurance companies that went belly-up in 1999 nearly doubled from the year before as property/casualty, health, and life insurers struggled with competitive pressures in their industries.

The number of insurance company insolvencies jumped from 20 in 1998 to 35 in 1999, according to a recent report issued by Standard & Poor's Ratings Services. Standard & Poor's, which rates the financial strength of insurance and financial services companies, predicts the number of insolvencies will continue to rise due to increased competitive pressure and unfavorable market conditions that will not likely change.

Nevertheless, the 35 companies that failed represent only 1.2 percent of the 3,000 insurance companies doing business in the U.S. Insurance continues to be among the most financially strong industries in the U.S., according to Standard & Poor's.

Traditionally, an insurance company becomes insolvent when its liabilities exceeds its assets. However, in its report, Standard & Poor's considers companies who have been taken over by the state as insolvent. Steven Dreyer, managing director of Standard & Poor's insurance ratings division, says that while some companies on the list may have assets exceeding liabilities, they may still be subject to regulatory action by the state because they are financially unstable.

Despite the presence of a guaranty fund in most states that will pay claims to policyholders if their insurer goes belly-up, Standard & Poor's says that policyholders still face delays in receiving claims, incomplete or disputed claim payments, and difficulties in finding replacement coverage if their insurer goes under. "Even if you're covered, it's a bureaucracy," notes Dreyer. "[States] are not known for prompt, speedy claim service."

Dreyer says that some states limit how much a policyholder can receive from a claim. For example, in Missouri, if you are named as the beneficiary of a life insurance policy death benefit of $500,000, the most you can recieve from the state guaranty fund is $300,000, according to Randy McConnell, a spokesperson for the Missouri Department of Insurance.

If an insolvent company is acquired by another insurer (as is the case with Metropolitan Life Insurance Co.'s recent purchase of General American Life Insurance Co.), policyholders of an insovent company have little to worry about. Dreyer says policyholders could run into trouble if the insolvent insurer remains in limbo with no prospective buyers, and they can't get replacement coverage. For example, if you have an outstanding auto claim, you may not be able to get standard auto insurance. Or if you have life insurance with a company that became insolvent and your health has deteriorated since you bought the policy, you may have to pay a higher rate to secure insurance.

Here is Standard & Poor's analysis in each sector of the market:

• Health insurance. A total of 14 HMOs failed last year, leaving 500,000 customers without health insurance. More than half of all HMOs lost money in 1998, and given the increased number of statutory filings in 1999 and 2000 that showed poor financial health, losses will continue. Solvency levels in many states are still weak, as only five states adopted reserve requirements set for HMOs by the National Association of Insurance Commissioners. More states are expected to follow suit in 2000 and 2001. Standard & Poor's expects the trend to continue into this year, exemplified by the recent failures of Harvard Pilgrim Health Care of Massachusetts and SunStar Health Plan of Florida.

• Property/casualty insurance. A price war was the main culprit behind the failure of nine property/casualty insurers. The increasing pressure to offer low prices has cut into reserves, which in turn has cut into profits.

• Life insurance. Poor investments in local municipal bonds and a lack of diversified investments were among the reasons why 12 life insurance companies failed in 1999. Standard & Poor's feels that this is the most stable of the insurance sectors.