Green Tree Perpetual Leaves Insurance Business

December 20, 2004

The Green Tree Perpetual Assurance Co., one of the nation’s oldest insurers with roots in the 1700s and one of only a handful of companies still selling perpetual homeowners insurance policies, is going out of business.

Charles D. Barber, chief executive officer of the Philadelphia based insurer, sent letters to policyholders Dec. 10 announcing that all policies will terminate on Feb. 7, at which time any remaining deposits will be returned to insureds. Policyholders may receive their deposits before that date if they desire.

Barber told insureds that the company has been unable to generate sufficient investment returns to remain viable in the face of high reinsurance and other expenses.

“It is with the deepest regret that the company must take this action, which has occurred only after all diligent efforts to secure additional capital or find a suitable business partner to allow the company to continue have been exhausted,” Barber reportedly wrote.

“While The Green Tree’s overall book of business has continued to be favorable, losses reasonable and manageable in size, and attendant expenses adequately controlled, the economic downturn of the past four years has reduced the company’s capacity to generate sufficient investment return to offset the normal expenses of underwriting insurance,” Barber wrote.

Under a perpetual insurance policy of the type sold by Green Tree, policyholders pay a lump sum deposit – for example, 10 times an average annual premium — up front and that money is invested to cover losses. The deposit is returned to the policyholder if and when the policy is canceled.

In 1752, Ben Franklin founded perhaps the most famous perpetual insurer, The Philadelphia Contributionship for the Insurance of Houses from Losses by Fire.

A group of former Contributionship policyholders founded Green Tree as the Mutual Assurance Co. in 1784. The group opposed a Contributionship underwriting rule that banned trees in the yards of insured homes.

Green Tree has been writing homeowners business in the Philadelphia area, as well as parts of New Jersey, Delaware, Maryland, Ohio and Pennsylvania.

Green Tree was acquired by National Grange Mutual Insurance Co. of Keene, N.H. in 1996 and was later acquired by Penn Mutual Insurance Co. of West Chester. In 2003, when Harleysville Mutual Insurance Co. acquired Penn Mutual in 2003, Green Tree was excluded from the purchase.

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