Credit General Insurance Company and Credit General Indemnity Company are back on track after a brief period in which the companies stopped writing new business.
Henry C. Sibley, vice president of underwriting, sent a letter to agents on Sept. 15 stating that: “No new business will be bound, outstanding quotes must be withdrawn. We will be issuing non-renewal notices on all business in accordance with state statutes. We will continue to service the existing book of business until expiration.” Sibley gave the reason for the change as “surplus constraints.”
“Basically, we’ve written more premium than we could comparably cover by our surplus,” Sibley told Insurance Journal. “This is not a California thing- this is a nationwide thing.”
Any signs of hope? “We’re looking hard-we hope this is a temporary condition,” Sibley said. Apparently, the hard work paid off; on Sept. 21, the Credit General companies signed a cut-through reinsurance agreement with AmTrust Financial Group through its subsidiaries, allowing Credit General to resume writing new business immediately. The arrangement gives Credit General access to additional surplus of $20 million, according to Bryan Griffin, president of PRS Insurance Group Inc., Credit General’s parent. A Delaware holding company formerly known as The Phoenix Insurance Group, PRS acquired Credit General in 1991.
Credit General Insurance Co., a property/casualty carrier domiciled in Ohio, holds 50 admitted licenses as well as E&S authority in Texas. Credit General Indemnity Co. is also an Ohio-domiciled p/c carrier, with admitted licenses in Ohio, California and Texas and E&S authority in 17 states. Their products include workers’ compensation, specialty truck, contractors general liability, surety, multi-peril and agency rent-a-captive programs.
Kenneth Brown, director of communications for the Ohio Department of Insurance, said that no action had been taken against Credit General. “We are in the midst of conducting a financial examination in Ohio,” Brown said. “[Credit General] failed to file a quarterly statement, and we are working with them to find out what financial condition they are in. This is not an uncommon practice; we conduct financial exams with all our companies.”
On Sept. 22, A.M. Best Co. downgraded the financial strength rating of Credit General from “B++” (Very Good) to “C” (Weak) and placed the group under review with developing implications.
Aside from the group’s inability to file second-quarter financial statements, the rating reflects Best’s “concerns about the group’s loss reserve position and the collectability of reinsurance recoverables.” Other factors in the downgrade were the group’s “below-average capitalization level, weak balance sheet, declining liquidity measures, dramatic growth in workers’ compensation business and the highly priced and competitive commercial-lines market.”
According to Best, PRS has experienced negative cash flow over the past two years, and at year-end 1999, the group maintained financial leverage of 32.6 percent, based on total debt to total capital.
In June 2000, Best lowered PRS’ rating from “A-” to “B++”. PRS issued a statement in response that: “The Group’s current-year projected growth of approximately 25 percent is in line with past years in which both positive operating income and above average returns were generated. Moreover, this growth is largely due to the migration of an existing book of profitable workers’ compensation business away from a partnering carrier, to reduce front fees and to thereby further increase income. The Group continues to move toward issuing smaller policies in its largest line (workers’ compensation) as it intensifies its marketing to smaller customers via the Internet.”
The new cut-through reinsurance arrangement with AmTrust Financial should help to alleviate some of the pressure, and according to AmTrust Executive Vice President Barry Zyskind, it should benefit AmTrust as well. “AmTrust has been looking for significant market-niche opportunities, and the Credit General agreement affords us an initial opportunity in that area,” Zyskind stated.
Founded in 1981, AmTrust provides p/c insurance through its subsidiaries to customers of technology vendors.
Topics Workers' Compensation Excess Surplus Ohio Property Casualty
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