California’s Conservation and Liquidation Office (CLO) will distribute $530 million to policyholders and claimants from the liquidated estate of the Mission Insurance Companies, California Insurance Commissioner John Garamendi announced Wednesday. The latest amount brings the total amount distributed since 2003 to $750 million, the largest distribution ever made to claimants of a property and casualty insolvency, Garmendi said.
A Superior Court ruling last month approved the Commissioner’s plan to distribute the money. Under the plan, Mission and Mission National policyholders will receive 100 percent of their approved claims; Mission National Insurance Co. general creditors with approved claims will receive 100 percent of their claims; and the Mission Insurance Co. general creditors with approved claims will immediately receive 30 percent of their claims, with more distributions likely at a later date.
“The ultimate goal of this liquidation was to make policyholders and claimants whole despite the collapse of the companies,” said Commissioner Garamendi.
Throughout the early 1980s, the Mission Insurance Companies were one of the country’s top workers’ compensation insurers, according to the commissioner’s office. However, competition spurred declines in the rates of property and casualty insurance, leading to financial problems for the Mission companies. Formal court conservation proceedings began in late 1985, with liquidation proceedings commencing in early 1987.
The Mission Companies became insolvent because they had underwritten unprofitable business, including reinsurance coverage to other insurance companies. Many of the losses incurred were severe and long-term by nature – such as a number of large asbestos-related claims and other environmental pollution claims, the commissioner said.
Exacerbating those problems was the fact that companies that had reinsured the Mission Companies failed to honor their financial obligations. Without them, insolvency was virtually inevitable, Garamendi said. At the time of failure in 1987, the Mission Companies were the largest property and casualty insurance insolvency in the country, with policies written in all 50 states, he said.
Since liquidation, the Mission Companies have collected in excess of $1.22 billion in legal and reinsurance recoveries, and processed more than 165,000 claims that were filed with the liquidated estates. They have already distributed in excess of $900 million, and coupled with the current $530 million distribution, the companies will have paid out in excess of $1.4 billion to approved claimants.
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