N.Y. Dept. Moves To Keep Weak Firms Afloat

N.Y. Dept. Moves To Keep Weak Firms Afloat

By Caroline McDonald

New York

A New York Insurance Department official said his agency has started a program to foster rehabilitation, rather than liquidation, of financially shaky insurers.

Peter J. Molinaro, senior deputy superintendent for insurance, said the department is aiming to create a more “flexible, adaptive” liquidation program.”

Mr. Molinaro noted that State Insurance Superintendent Gregory V. Serio “has made statements, in no uncertain terms, that he needs the bureau to be more flexible, more adaptive, and certainly more geared to rehabilitation of companies as opposed to just straight-out liquidation of companies.”

His comments came last week in New York City at a meeting of the Advancement of Professional Insurance Women.

While the department believes, given the state of the insurance market, the state of the stock market and the direction of the economy, that liquidation service may be necessary, “our first step is to make every effort at rehabilitation,” Mr. Molinaro said.

A better rehabilitation program is important because “the whole point is to get the company well again–to get it back into the market, back paying taxes and back employing people,” he said. He contrasted this to the idea that when companies “used to go to the Liquidation Bureau, it was a death sentence–the company wasn't going to come out.”

Mr. Molinaro noted that, in the history of the bureau, only one insurer has been restored to solvency.

“We want to change that,” he advised.

In an initial move to refashion the liquidation program, the department, on Jan. 15, hired James P. O'Connor as special deputy superintendent of the Liquidation Bureau. Mr. O'Connor, since December 1995, served as chief legal officer of the New York State Insurance Fund.

New York “wants to be a leader in the country in rehabilitating companies, and that's the mission that Greg Serio and I have given Jim O'Connor,” he said. “He is aggressively taking that up now” by “reviewing every aspect of the bureau's operations,” he said.

Reproduced from National Underwriter Edition, April 28, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.