Delaware's insurance regulator will decide in two weeks whether to approve the controversial spin-off of Royal & Sun Alliance's U.S. subsidiary–a move critics fear would jeopardize payments of World Trade Center claims and other obligations.
Delaware Insurance Commissioner Matt Denn said Friday that after his ruling he will stay his decision for five days to give dissatisfied parties an opportunity to seek redress in the courts.
Mr. Denn's announcement followed word that Hearing Officer Lawrence Hamermesh has recommended that the proposed spin-off be granted approval.
The U.K.-based Royal & Sun Alliance's move to sell the U.S. company to its management has drawn fire from federal lawmakers and the World Trade Center lease holder.
New York's two U.S. senators have also stepped into the fray for fear the proposed new carrier spun off from its U.K. parent would not have the wherewithal to pay off claims relating the World Trade Center.
Janno Lieber, World Trade Center project director for WTC developer Larry Silverstein, said the deal is a "blatant attempt by Royal & Sun Alliance to ditch its U.S. division."
"It is an outrage that would result in its U.S. policyholders getting stiffed on their legitimate claims," he said.
Mr. Lieber also said that "after five years of litigation and two jury verdicts that were affirmed by the U.S. Court of Appeals, it's time for this foreign insurance company to make good on its obligations to help fund the rebuilding of the World Trade Center."
U.S. Senator Hillary Clinton, D-N.Y., wrote that "without Royal Indemnity Company's full payment of its obligations, efforts to develop Ground Zero will be seriously impeded."
Royal Indemnity is one of the four U.S. subsidiaries the parent British company announced in 2003 that it was selling off because it was not central to core business.
Along with more than two dozen other insurers, Royal Indemnity took out policies with Mr. Silverstein weeks before the Twin Towers collapsed on Sept. 11, 2001.
RSA USA is also involved in litigation over potentially costly asbestos and environmental claims, including a Michigan lawsuit in which General Motors asserted a claim of more than $1 billion, for which the insurer has not put up any reserves.
RSA USA currently has $2 billion in reserves to meet likely claims obligations and $700 million in surplus funds, according to insurance regulators.
In addition, the U.K. parent has agreed to provide $287.5 million in financing for the proposed buyout of the U.S. operations by its management.
At the Delaware hearing last month, it was reported that RSA USA Chief Executive Officer John Tighe said the company has made significant progress in reducing major lawsuits since 2003 and the buyout represents a "great benefit" to policyholders.
Mr. Tighe did not respond to a request for comment.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.