(Sacramento, CA – Insurance News and Markets) – CastlePoint National Insurance Company has been placed into conservation, as the final remaining insurance company in the Tower Group. The San Francisco Superior Court ordered this conservatorship as a way to protect policyholders and injured workers who were covered under policies from CastlePoint and other companies.
California Insurance Commissioner Dave Jones mad this announcement on July 28. Jones filed a motion asking for approval of a Conservation and Liquidation Plan for the company as a way to protect individuals who have policies. This move protects individuals by deconsolidating CastlePoint from the Tower Group. The hearing for the motion to approve the plan is set for Sept. 13.
This move will bring new value to policyholders and create an efficient and orderly process to liquidate CastlePoint, by ensuring that the Insurance Guaranty Funds around the country can assume responsibility for administering and paying CastlePoint’s insurance claims without disruption when the Court issues a final liquidation order.
“Today’s conservation of CastlePoint National Insurance Company is the next chapter in the long-running struggles of the Tower Group,” said Commissioner Jones. “My department and other regulators around the country have been concerned with the Tower Group’s financial condition for many years, and we have been carefully monitoring Tower to determine if intervention was necessary to make certain Tower would honor their claim commitments. The time for me to intervene to protect policyholders arrived today.”
The Tower Group’s troubles became apparent in 2013. Before that, the company grew by acquiring smaller insurers; unfortunately, management was not successful in integrating those companies. In October 2013 the Tower Group announced that it had deficiencies of nearly $400 million in its aggregate policyholder loss reserves. The next September, a Bermuda reinsurer called ACP Re acquired the Twower Group. While that acquisition substantially improved Tower’s situation by migrating policy and claims administration to more reliable data systems at AmTrust and National General, the volatility and deterioration of the pre-acquisition claims continued unabated through 2015. By the end of 2015, the Tower Group reported additional loss reserve deficiencies well above $400 million.
“The plan and process of consolidating 10 companies from six states into a single insurer for purposes of conducting a uniform and efficient conservation and liquidation was immensely complicated and challenging,” said Commissioner Jones. “The level of cooperation my department received from fellow regulators was greatly appreciated and is another demonstration of the effectiveness of our 50-state insurance regulatory system in protecting consumers that have the misfortune of having purchased insurance from financially unstable insurers.”
The merger and consolidation of the other insurance companies into CastlePoint was completed only days before the Commissioner placed CastlePoint into conservation.
Source: California Department of Insurance.