According to Michael Camilleri, president and CEO of Amtrust Insurance Operations, Amtrust Financial Group signed a definitive agreement on Nov. 20 to purchase the insolvent Credit General Insurance Company. Credit General, an Ohio-domiciled property/casualty company with a large book of California business, is currently in rehabilitation with the Ohio Department of Insurance.
“Amtrust signed a definitive purchase agreement and purchased the corporate shell, the infrastructure and the right to Credit General business, the right to renewals,” Camilleri said. “The company will go into liquidation in approximately a month or so, perhaps less, and at that point we will be purchasing the corporate shell.”
However, the story is a little different over at Credit General. In a Nov. 21 interview, Ohio Department of Insurance Director of Communications Ken Brown said that nothing had been finalized yet. “We are in negotiations with Amtrust for the sale of part of that company…It is likely, we’re hoping that it will be within the next day or so. We’re real close but there are still a few issues that haven’t been resolved-nothing’s been signed yet.”
The Ohio Department is currently investigating Credit General for potential criminal activity.
Although Brown said he was not at liberty to discuss the investigation, he confirmed that the Department was looking into evidence that false financial reports were filed and funds belonging to the company were diverted. “The investigation did turn up some issues that the Department feels need to be turned over to prosecutors,” he said.
On Dec. 9, Ohio Insurance Director Lee Covington filed a request that the Beachwood, Ohio-based property/casualty company be placed into rehabilitation, and the Franklin County Court of Common Pleas granted the order. According to the Order of Rehabilitation, Credit General “is in such condition that its further transaction of business outside of rehabilitation proceedings would be financially hazardous to its policyholders, creditors or the public.” The company, which is licensed to do business in 48 states, will be operated in rehab by the Department. The order also applies to Credit General’s wholly owned subsidiary, Credit General Indemnity Company.
In a statement, Covington expressed his commitment to protecting policyholders of Credit General. “We have been and will continue to be vigilant in our efforts to identify and hold accountable those who are responsible for the wrongdoing that led to this company’s failure,” he stated. “I will not tolerate false reporting, fraud and theft. I will do everything in my power to ensure that those who are guilty of these crimes are prosecuted to the fullest extent of the law.”
Amtrust is not too worried about the potential criminal aspects of its new acquisition. “Our contract is on a go-forward basis, and none of that affects our deal, our responsibility or our liabilities,” Camilleri said. “As a result, frankly, we have not taken any role or any interest in what’s happening there…we’re leaving that completely up to the state.”
On Sept. 20, Amtrust and Credit General entered into a cut-through reinsurance agreement under which any business that was written by Credit General since that date was reinsured by Amtrust. “We’ve been negotiating this deal since then,” Camilleri said. “…It was tough to get a handle on what the potential liabilities were because there are these reinsurance collectibles, and as a result we are not picking up any liabilities that the company had before the cut-through-so it’s only the business that we’ve written since the cut-through effective date. Whatever that ultimate gap is, it will not be our responsibility.”
The go-forward plan includes changing the company name to Amtrust General Insurance. Amtrust is not yet disclosing the terms of the transaction; “they are confidential amongst the parties,” Camilleri said.
Michael Karfunkel is chairman of New York-based Amtrust, which is made up of several divisions, according to Camilleri. “There’s American Stock Transfer & Trust Company; there’s a real estate operation; there are four insurance companies-two of which are domestic [Technology Insurance Company in New Hampshire, and Rochdale Insurance in New York]; and two which are international [Amtrust International Insurance in Dublin, Ireland; and Amtrust Financial International, which is a Bermuda captive]…they’re all small operations.”
Technology Insurance is currently rated “B++” by A.M. Best and operates mainly as a property/casualty company, specializing in inland marine, auto physical damage and general liability risks. Although the company originally offered its coverages only to Wang Global and its customers, today Technology distributes its products to other technology vendors as well.
According to A.M. Best, the company recently entered into strategic relationships with equipment manufacturers such as NEC and Hewlett Packard. Technology is currently licensed in 21 states with applications submitted in 12 additional states. In those states where the company is not licensed, business is written in conjunction with Chubb companies and the risk is partially assumed by the company.
What is the appeal of Credit General for Amtrust?
“The company has primarily a workers’ compensation market focus-primarily small employers, which is a target niche of Amtrust-and it has an Internet delivery product that’s very attractive to us,” Camilleri said.
Both Credit General Indemnity and Insurance are currently rated “E,” under regulatory supervision, by A.M. Best. As far as Credit General’s financial situation, “nobody can really tell at this point,” Brown said. “We’ve spent a lot of time doing financial audits of this company and we’re still trying to finish figuring out where things actually are.”
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