Security Indemnity Insolvent
By Mark E. Ruquet
NU Online News Service, Feb. 3, 10:43 a.m. EST?Security Indemnity Insurance Company, a small auto and commercial liability underwriter, has been declared insolvent and placed in liquidation by a New Jersey Superior Court judge in Trenton, N.J.[@@]
The New Jersey Department of Insurance & Banking requested the liquidation after attempts to return the company to profitability failed. Security Indemnity currently is under-reserved by $6.9 million. The department said that under the state law, the Manasquan, N.J.-based company must have $8 million in surplus.
Under the insolvency declaration, the company's claims are being placed with the Property Liability Insurance Guaranty Association, the state's guaranty fund, for payment. The court granted the insolvency declaration Jan. 29, said Mary Cozzolino, assistant commissioner of public affairs. The company has until March 16 to appeal the decision, she said, but the insolvency action is in effect.
An order placing Security Indemnity in rehabilitation and under supervision of the insurance department was secured by the department last June.
The action was taken after the company reported available surplus of $710,710 in its 2002 annual statement, down from $6 million the previous year.
The company wrote primarily commercial and private passenger auto business. The company stopped writing new business under a consensual administrative supervision order in February of 2003. It stopped renewing existing customers in June of that same year. Currently, the company is responsible for 6,532 policies.
In June of 2003, the state passed reform legislation aimed at bringing new carriers into the market and reforming the system to make it a healthier environment to do business, and still protect consumers. However, Commissioner Holly C. Bakke said, in a statement, that the reforms "could not help all of the companies that were financially impaired as a result of decades of over-regulation and poor business decisions." She added that the company made a number of bad business decisions that lead to the insolvency.
Ms. Cozzolino said that this insolvency does not indicate other companies will become insolvent in New Jersey. However, she added, there are some that do need rate increases or other financial action to help them remain healthy.
Security Indemnity also wrote business in New York, Pennsylvania, Connecticut, Florida, Maryland, Minnesota and Missouri. Ms. Cozzolino said those states have been notified and are dealing with the insolvency through their guaranty funds.
Security Indemnity could not be reached for comment. Telephone numbers listed for the firm have been disconnected.
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