New York officials announced that the Interboro Mutual Indemnity Insurance Co. is on track to emerge in early 2007 from three years of insolvency and subsequent rehabilitation and return to the marketplace as a private sector company. The Mineola company is the oldest insurance company on and serving Long Island.
“Interboro’s rehabilitation is a tribute to everyone who worked so hard to resolve the many issues facing the company,” said outgoing Superintendent of Insurance Howard Mills in a statement dated Dec. 29, 2006. “A successful rehabilitation is rare and inspiring. The New York Liquidation Bureau and Judge McCarthy especially deserve praise for helping turn what could have been a burden on taxpayers into a contributing taxpayer itself.”
Interboro is a property and casualty insurer domiciled in New York. The company was placed in rehabilitation and the New York Superintendent of Insurance was appointed as rehabilitator on April 6, 2004 by order of the Supreme Court of New York.
Interboro primarily wrote private passenger auto, homeowners and general liability coverage, as well as a small amount of commercial auto and workers compensation coverage.
Most companies declared insolvent end up in liquidation. Interboro’s successful rehabilitation means the company will continue as a going concern, preserving close to 70 jobs, according to Mills. The investor group scheduled to become the new owners has committed to keeping the jobs and the company’s operations on Long Island, according to officials.
“I think the outcome of the Interboro case was a unique collaboration of all concerned parties to do what was in the best interests of their particular concern,” said Judge Edward W. McCarthy, III, Justice of the Supreme Court of the State of New York, 10th Judicial District, Nassau County, who has overseen the case.
McCarthy has scheduled a hearing for Feb. 1, 2007 to show cause why Interboro should not be discharged from rehabilitation. With an influx of capital from an investor group, Interboro will no longer be insolvent, paving the way for its discharge from rehabilitation.
The New York Liquidation Bureau (NYLB), which secured the investor group, managed Interboro during the period of rehabilitation. A particular difficulty with Interboro involved the need to secure sufficient capital to make the company solvent because Interboro, as a mutual company owned by its policyholders, was unable to issue stock to access capital.
The liquidation bureau was able to successfully set the stage for the first demutualization of an insurance company in rehabilitation in New York. This will end with the transformation of Interboro into a stock company with stock to sell to the investor group, subject to court approval on or after the Feb. 1 hearing.
At that hearing, the court will be asked to approve the conversion to a stock insurer (the demutualization), the acquisition by the investor group to bring in the capital to render the company solvent and the discharge of the company from rehabilitation thereby allowing it to commence business again as a stock insurer.
The liquidation bureau acts on the insurance superintendent in the discharging of his statutorily defined duties to protect the interests of the policyholders and creditors of insurance companies that have been declared impaired or insolvent.
Source: N.Y. Sate Department of Insurance