Reliance Insurance Company has been in financial for some time and the following provides you, the insured, up-to-date information on this story as of September 10, 2001.

September 10, 2001, Monday, BC cycle 
Business News 

     Court sets deadline for regulators to salvage troubled insurer 

  PHILADELPHIA - A Commonwealth Court judge has given state regulators a Dec. 4 deadline to salvage Reliance Insurance Co., which lost more than $1 billion last year, or shut down the troubled company. 

  If the state chooses the latter path, a portion of Reliance's claims would be paid by a network of national funds that bail out insurers - and ultimately passed on to consumers. 

  The state took over the 184-year-old business insurer on May 29. 

  The Center City-based firm faces 200,000 claims and 15,000 lawsuits filed against some of its 75,000 clients, ranging from worker's compensation issues to construction liability to securities fraud complaints. 

  At a scheduled bankruptcy hearing in New York on Wednesday, state regulators who want to preserve the company's assets for claimants are expected to challenge those who want them divided among creditors, including some of the country's largest financial companies. 

  "The big issue is how much cash does Reliance have? How long can they continue to pay claims?" said Tony Grippa, executive director of the Workers Compensation Guaranty Association of Florida, one of dozens of funds that bail out failed insurers with surcharges that businesses and consumers pay on their insurance. 

  He said his fund plans to charge insurance companies in Florida the maximum 2 percent surcharge next year - mostly to pay for losses he expects to be generated by claims against Reliance customers in the state. 

  Pennsylvania residential and business insurers already charge the maximum 2 percent surcharge because of previous insurance company failures. State regulators say they do not know how they will meet any additional bailout costs. 

  With debts approaching $2 billion, Reliance could become the largest insurance bailout in state history. 

  Reliance is not affiliated with Reliance Standard Life Insurance Co., a profitable health insurer based in Philadelphia. 

  In an order issued Friday, Commonwealth Court Judge James Gardner Collins set the December deadline for the Pennsylvania Insurance Department to rescue the company. 

  The order comes as the state struggles to have the company pay up to $10 billion in insurance and reinsurance liabilities. 

  Meanwhile, the company faces other financial pressures from several fronts: 

  -J.P. Morgan Chase & Co. and other top banking companies hope to collect hundreds of millions of dollars in unpaid Reliance loans and bonds. 

  -The federal Pension Benefit Guaranty Corp., which insures corporate retirement plans, said it may need more than $100 million to cover a shortfall in Reliance's pension plan. 

  - The IRS has asked federal prosecutors in New York to help investigate $46 million in questionable tax refunds Reliance Group received last year. 

  - Pennsylvania House Majority Leader John Perzel (R-Phila.) wants the state Insurance Department to resume severance payments to 340 laid-off Reliance workers that the state suspended in an attempt to save $8 million. 

  -And the University of Pennsylvania may cancel several endowed faculty chairs if Reliance and longtime chairman Saul Steinberg do not come through with promised grants. 

  Steinberg has pledged $36 million to Penn since the late 1970s, and has two buildings named after him at the Wharton School, which he attended. 

  University spokeswoman Lori Doyle said Reliance had made a $600,000 pledge to the Penn School of Medicine. 

  " ... Naturally, we're following the bankruptcy proceedings," she said Thursday. 

  Steinberg collected an average of more than $10 million annually in dividends, salary and company-subsidized stock options during the 1990s, The Philadelphia Inquirer reported in Sunday's editions. 
 

Volume II     Bulletin #2

On August 25, 2001, Jeff Ostrowski, a Palm Beach Post Staff Writer, authored an article entitled Insurere's Dropping of Condos Illegal.  According to a State Administrative Law Judge, John G. Van Laningham, Florida's windstorm insurance pool illegally is forcing thousands of coastal condominium unit owners to switch insurance companies. 

At issue, as discussed in Bulletin #1 of this Forum, the FWUA (Florida Windstorm Underwriting Association) decided to drop 47,000 condo units as insureds after Atlantic Preferred Insurance Co agreed to insure the units.  The problem for the Florida public is that Atlantic Preferred agreed to write the Wind coverage ONLY IF they write the rest of the coverage (ie:  fire, theft, etc).  Thus, Florida policyholders had to forgo their current policies which would not provide the necessary Wind coverage. 

As we discussed earlier in Bulletin #1, the assertion by Atlantic Preferred that their program would be cheaper than premiums currently being charged has proven to be a dubious prophesy.  The article quotes Jupiter resident David Mutters as saying that his premium, after being forced to change to Atlantic Preferred, rose by almost 50% (from $279 to $409).

The FWUA, in its arrogance, has decided to continue to drop condo owners as their policies come up for renewal while they appeal the Law Judge's ruling. 

Write your State legislator and demand that the FWUA halt this hurtful practice that is being perpetrated upon the residents of Florida. 
 

Volume II     Bulletin #1

On April 14, 2001, the Palm Beach Post printed a story, Insurers fight state plan to end coverage, about a move by Atlantic Preferred Insurance Company of Tampa ("Insurer") to remove approximately 47,000 homeowners insurance policies from the Florida Windstorm Underwriting Association ("FWUA") and write this Wind coverage themselves.  Furthermore, the FWUA will not renew any Wind coverage for those properties picked by the Insurer beginning in July. 

If this was all to this story, The Forum would have no problem with this move.  However, there is more to be told. 

According to the Post, the Insurer agreed to take on this risky Wind coverage only on the condition that it could write the lucrative coverages of Theft, fire, and other such perils.  Thus, YOU, the insured, will be FORCED to move your Homeowners policy from your current insurance company to Atlantic Preferred.  YOU HAVE NO CHOICE! 

There are multiple reason for our objection.  The first of which is that your current policy will probably have significantly MORE coverage than the new program you are likely to get (this is based upon the assumption that a similar situation would take place as that of the new 'Floridian' policies' coverages to the 'old' policies that preceded them). 

The second, and the most important reason in our opinion, is the financial rating that this insurer has. 

The 2000 Edition Best's Key Rating Guide rates this Insurer as an NR-1  FSC IV.  To translate, the NR-1 means there is "insufficient data" to rate.  This is probably due to the fact that this Insurer was formed about 1998.  The FSC IV means that this company has approximately $5-10 million dollars of capital, surplus and conditional reserve funds.  You determine the sufficiency of this company's financial strength when you realize that Safeco Insurance Co., Allstate Insurance Co (not Allstate Floridian) and other Homeowner insurers have over $2 Billion.  Even Allstate Floridian has almost $500 million. 

Another rating company, Weiss Rating Guide to Property and Casualty Insurers- Winter 2000-2001, rates this Insurer "C" meaning that "the company offers fair financial security and its currently stable.  But during an economic downturn or other financial pressures (how about another Hurricane Andrew?), we feel it may encounter difficulties in maintaining its financial stability".  Now, the last thing the public needs is to worry about collecting on a major loss and the insurer being unable to pay!

You get all of the above for, as Bill Poe, Jr. states in the article, a 15% savings.  That should amount to about $70 per year. 

How does that look against the prospect of potentially having less coverage and a potential problem of not collecting on your catastrophic loss at all!

Write the Department of Insurance IMMEDIATELY with your views on this subject.  However, if you do not understand this potential problem now, you will get it in the end.

PS:  Review Volume I  Bulletin #1 regarding Hurricane season!
 

Volume I        Bulletin #2

The "Forum" does not normally lower itself to enter any political fray.  However, an exception is being made at this time due to what are, in our opinion, intentional distortions by candidate McCollum.  Mr. McCollum is running for Senate against the current Insurance Commissioner Bill Nelson. 

Mr. McCollum is stating that under the regime of Mr. Nelson, our insurance rates have risen dramatically.  That statement is accurate. 

Mr. McCollum also goes on to state that these increases are the fault of Mr. Nelson and leads us to believe that they are a result of his failed policies (no pun intended).  Mr. McCollum knows or should know that such statements are totally untrue. 

While the "Forum" is not enamored with Mr. Nelson as Insurance Commissioner, we do admit that he inherited an office in disarray from his predecessor (who, by the way, is running for the office of Insurance Commissioner, again).  Mr. Nelson has, on approximately eight occasions (of nine rate increase requests), rejected the rate increase requests by insurance companies, only to be cut off at the pass by an arbitration panel that Mr. McCollum and his fellow legislators implemented and endorsed.  The arbitration panel has ruled AGAINST Mr. Nelson EVERY TIME!

The "Forum" cannot comment about any of the other issues being touted by these two candidates.  But, if this one issue is any indication of the truthfulness and integrity of Mr. McCollum, the remainder of his comments should be further investigated by all of us prior to going to the polls in two weeks. 
 

Volume I          Bulletin #1 

Beginning June 1, we enter Hurricane Season.  The season ends November 30.  During this period, should you need insurance, either a new policy or increases in property limits on an existing policy, be aware that it is possible for you to be refused by your agent or insurance company.  This can happen if a 'named storm' (does not yet have to be a hurricane) is anywhere within a 'box' that is bounded from Haiti (to the South and East) to the Texas/La. border (to the West) to the middle of the Carolinas (to the North). 

In order to obtain coverage, be sure to notify, in writing, your agent or insurance company prior to the time that the storm in question enters this 'box'.  You can request an effective date weeks into the future but, what is important, is that THE NOTIFICATION is received prior to the storm's entry. 
 

Future installments of THE FORUM will address some of the policy and business practices of those insurance companies that write a significant amount of the total insurance issued to the public. 

If you would like to ask a question or make a comment, E-Mail us at jbookrmc@flite.net.  We look forward to hearing from you.  We thank you for turning toRISKMANAGEMENT.COM.