NU Online News Service, Feb. 15, 12:00 p.m. EST
First Sealord, a bond and surety insurance company based in Villanova, Pa., has been placed in receivership.
The company’s problems were linked to the troubled construction market.
The Pennsylvania Insurance Department was given state court go-ahead to liquidate the company Feb. 8 after an attempt to sell the troubled company to Global specialty insurer Torus in December was called off.
Torus made a deal in December to purchase First Sealord in an attempt to get into the surety market, but it was called off in January, according to officials of the Pennsylvania insurance department.
At that point, the department adds, First Sealord placed itself into run off. Soon after, the department petitioned Commonwealth Court with an order of liquidation.
First Sealord had experienced a steep drop in its surplus after creditors had gone after the surety bonds in numerous cases throughout the country where construction companies or builders had failed to complete projects or pay for them.
First Sealord sold its products through more than 300 agents and brokers. It was a monoline insurer of surety bonds that specialized in construction surety for the small- and medium-size construction contractor. It did business in 39 states.
According to several bankruptcy websites, First Sealord had been challenging claims filed by creditors against it in numerous states over the past year in order to survive.
“I petitionedCommonwealth Court for a liquidation order because First Sealord Surety is no longer able to meet its policyholder obligations or pay its debts as they come due,” says Michael Consedine, state insurance commissioner.
“The court’s approval of our petition puts numerous policyholder safeguards in place and establishes an orderly payment process,” he adds.
According to the Pennsylvania department, First Sealord, in its 2011 second-quarter financial statement, reported a surplus of $10 million. By the third quarter statement, the surplus fell to $5 million and reflected a $6.7 million net loss.