NU Online News Service, Feb. 15, 12:00 p.m.EST

First Sealord, a bond and surety insurance company based inVillanova, Pa., has been placed in receivership.

The company's problems were linked to the troubled constructionmarket.

The Pennsylvania Insurance Department was given state courtgo-ahead to liquidate the company Feb. 8 after an attempt to sell the troubled company to Global specialtyinsurer Torus in December was called off.

Torus made a deal in December to purchase First Sealord in anattempt to get into the surety market, but it was called off inJanuary, according to officials of the Pennsylvania insurancedepartment.

At that point, the department adds, First Sealord placed itselfinto run off. Soon after, the department petitioned CommonwealthCourt with an order of liquidation.

First Sealord had experienced a steep drop in its surplus aftercreditors had gone after the surety bonds in numerous casesthroughout the country where construction companies or builders hadfailed to complete projects or pay for them.

First Sealord sold its products through more than 300 agents andbrokers. It was a monoline insurer of surety bonds that specializedin construction surety for the small- and medium-size constructioncontractor. It did business in 39 states.

According to several bankruptcy websites, First Sealord had beenchallenging claims filed by creditors against it in numerous statesover the past year in order to survive.

“I petitionedCommonwealth Court for a liquidation order becauseFirst Sealord Surety is no longer able to meet its policyholderobligations or pay its debts as they come due,” says MichaelConsedine, state insurance commissioner.

“The court's approval of our petition puts numerous policyholdersafeguards in place and establishes an orderly payment process,” headds.

According to the Pennsylvania department, First Sealord, in its2011 second-quarter financial statement, reported a surplus of $10million. By the third quarter statement, the surplus fell to $5million and reflected a $6.7 million net loss.