Insurance Underwriter - Regulatory and Legal Developments
| For insurer now in liquidation, 'fraud rings' led to big losses in '08 |  |
August 28, 2009 11:08 AM ET
By Kelly Durkin
|  Related Companies | Related Documents | Related Articles | Related Issues in Focus | Related Offerings |
Florida's Department of Financial Services believes further efforts to rehabilitate First Commercial Insurance Co. and unit First Commercial Transportation & Property Insurance Co. would be "useless," and their insolvent financial condition makes liquidation necessary, according to an Aug. 24 court order of liquidation. The department said Aug. 26 that the two companies were ordered into liquidation by a Leon County Circuit Court judge. Nina Banister, a spokeswoman for the Department of Financial Services, said the department became involved July 10 as receiver for rehabilitation of the companies. Banister said that after the department began looking at the company's records, it found that First Commercial Insurance had sold more than 2,000 auto service warranty policies that were not reflected in its books, records or financial statements. The department is investigating the issue further. All auto service warranty policies written by First Commercial Insurance were canceled as of Aug. 24 by court order. All other policies, including 550 commercial auto insurance or "for hire" policies written by First Commercial Transportation and 100 in-force policies written by First Commercial Insurance in Georgia will be canceled Sept. 23. First Commercial Insurance wrote workers' compensation, commercial auto, general liability and commercial multiperil insurance policies in Florida and Georgia. First Commercial Transportation wrote commercial auto insurance coverage in Florida. The department said that together, the companies have approximately 18,000 policies in force. For 2008, First Commercial Insurance generated $51.2 million in direct premiums written, according to SNL data. The company saw a sharp drop in direct premiums written in 2007, generating $60.9 million in that year, compared with $101.4 million in 2006. The company generated $31.5 million in workers' compensation direct premiums written in Florida in 2008 and a total of $51.1 million in direct premiums written in the state that year for all of its business lines, according to SNL data. First Commercial Transportation generated a total of $10.3 million in commercial auto direct premiums written in 2008. The unit is licensed to do business in Florida. Losses and loss adjustment expenses incurred grew 14% in 2008 and caused a net loss for the year, according to the management's discussion and analysis section of First Commercial Insurance's 2008 annual statement. The company reported a net loss of $9.5 million in 2008, compared to net income of $4.4 million in 2007. Results in 2008 reflected a $3 million loss on reinsurance arbitration and approximately $4 million from "several unusually large losses" in 2008, both related to its workers' compensation business. First Commercial Insurance also attributed the results to roughly $4 million in losses due to being the target of "several fraud rings" preying on personal injury protection coverage in its commercial auto line. The recent developments are not the first brush First Commercial Transportation has had with state regulators. According to the management's discussion and analysis of its 2008 annual statement, the unit was purchased by First Commercial Insurance in May 2006 and was previously known as Southern Group Indemnity Inc. The company was in administrative supervision by the Florida Office of Insurance Regulation from October 2005 until its sale due to its surplus dropping below state requirements. The company was then recapitalized and began writing new business in January 2007. First Commercial Insurance is a member of First Commercial Insurance Group. Calls to First Commercial Insurance were not successful. | 
Add to Library