New York regulators said today they have filed suit against OneBeacon Insurance Company as part of a crackdown on longstanding "delinquent reinsurers" who owe millions to bankrupt insurers the state has taken over.
The action against Canton, Mass.-based OneBeacon seeking $2.2 million the state says is due Midland Insurance Company, was filed by the New York Liquidation Bureau in New York State Supreme Court, a county level tribunal in Manhattan.
Midland Insurance, a former New York company, was placed in liquidation in 1986. (The company is not related to The Midland Company, a Cincinnati-based specialty insurance group.)
The Liquidation Bureau, said in a statement that under the new administration of Superintendent Eric R. Dinallo, the NYLB "has begun a proactive program to collect reinsurance balances from delinquent reinsurers."
NYLB is a non-state entity independent of the insurance department, which carries out the superintendent's responsibilities as a receiver and is not funded by taxpayers.
The bureau said the suit against OneBeacon is a first step to ensure all of Midland's reinsurers fulfill their contractual and statutory obligations.
Reinsurance amounts owed, according to the NYLB, relate to claims that have been approved by the New York State Supreme Court, a county level tribunal in Manhattan, which supervises Midland's affairs in liquidation.
"We are no longer waiting passively to collect vital assets that are necessary for proper resolution of claims," said Mark G. Peters, special deputy superintendent in charge of the NYLB.
The Bureau estimates it is potentially owed over $100 million from delinquent reinsurers, and Mr. Peters said that the NYLB's new program seeks to recover these amounts to the full extent possible.
Policyholders, he added, should not be further disadvantaged by "recalcitrant reinsurers who are unwilling to meet contractual obligations to pay the funds owed in a timely manner. In addition to the inherent difficulties of dealing with an insolvent insurance carrier, policyholders are also affected by the diminished amount of assets available under the normal distribution process."
The $2.2 million in the suit filed today, according to the state's compliant, was originally owed by General Accident based in Philadelphia, that company was merged into OneBeacon in 2001. It is now part of the Bermuda-based OneBeacon Insurance Group Ltd.
According to the state's papers, the reinsurance claims were made against excess umbrella liability policies that Midland took out to back up coverage provided to over-the-counter drug makers Bristol Myers and Bayer.
Carmen Duarte, a spokesperson for OneBeacon, said the company typically doesn't comment "on cases that are open."
NYLB carries out the insurance superintendent's responsibilities as receiver, and his legal duty to protect policyholder interests of policyholders and creditors of insurance companies that have been declared impaired or insolvent.
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