An application for an order of liquidation has been filed in a Travis County, Texas, district court for a Houston-based nonstandard auto insurer now in receivership.
With the agreement of its board of directors, ACCC Insurance Co. was placed into receivership on Oct. 21 by Travis County District Judge Tim Sulak at the request of the Texas Department of Insurance. The application for liquidation was filed Nov. 24 by the TDI-appointed Special Deputy Receiver (SDR) for ACCC, Prime Tempus Inc., which has found the company to be insolvent.
Privately held ACCC is headquartered in Houston and in addition to Texas, the company offers its insurance products in Alabama, Georgia, Mississippi, New Mexico and South Carolina. It is licensed in 20 states. According to the application for liquidation, “ACCC issues non-standard automobile insurance policies, bodily injury policies, and property damage policies with policy terms ranging from 30 days to one year, with roughly half of the policies having 30-day terms.”
In a message to ACCC employees dated Nov. 17, Craig A. Koenig, representing Prime Tempus, said no new business would be written by ACCC going forward and that a financially secure insurer was being sought to take over ACCC’s book of business. On Nov. 24 Koenig informed the company’s employees that the application for liquidation had been filed. In that message to ACCC employees, Koenig said he is working with third party entities that have expressed interest in exploring employment opportunities for some members of ACCC’s staff.
ACCC’s reported surplus had substantially declined between the end of 2018 and June 30, 2020, at which time the company had a policyholder surplus of $8,365,247, the application states.
At this time ACCC is now considered to be insolvent and “is in a condition such that proceeding with the conduct of its business would not be in the best interest of its policyholders, creditors or the general public,” according to the liquidation application.
The company’s June 30, 2020, quarterly statement showed it owning commercial properties in Bedford, Houston and San Antonio with a combined value of just over $20.6 million. The commercial property in Bedford has since been sold. “Based on the sales price of the sold property, and broker valuations and county appraisal district valuations of the other two properties, the SDR alleges that the market value of these properties is no more than $10,432,079. This adjustment to the real estate asset carrying value, standing alone, reduces ACCC’s surplus as regards policyholders below zero,” the application states.
ACCC earlier this year had obtained a $7,902,800 federal Paycheck Protection Program (PPP) loan, but as of Nov. 24 there was no indication that the loan had been forgiven. If accounted for as a liability, the PPP loan further reduces the company’s surplus, the SDR noted.
Additionally, the insurer’s reinsurance agreement covering 20% of ACCC’s in force business will be cancelled at the end of the year.
“The history of ACCC’s operations reflect an ongoing pattern of losses and erosion of surplus. ACCC cannot continue to underwrite policies without an increase of the risk of loss to creditors, policyholders, or the public. Its business is not profitable, so its losses continue to mount,” the liquidation application states.
The application requests that ACCC be declared insolvent by the court, a finding that would authorize the state’s property/casualty guaranty associations to pay the company’s outstanding policyholder claims. Additionally, “the SDR requests that the Order of Liquidation become effective at 12:01 a.m., December 30, 2020,” the court filing states.
The order for receivership had restricted the company’s “current and former officers, directors, underwriters, managers and employees (including Jack Henry Ikenaga Jr., Philip James Bither, Ross Edward Bennett, Jr., Frank M. Paris, Mike Cameron Weaver, Robert Mark Sumners, Michael Sear, and Jose Daniel Saenz); owners and affiliates (including ACCC Holding Corporation, ACCC Claims Service, Inc., Best Texas General Agency Inc., Swift Premium Finance Company, Jack Henry Ikenaga, Jr., the Lutz Corporation, and Isthmus, Inc.); local recording agents, managing general agents (including ACCC General Agency Inc. and Freedom National Insurance Services Inc.), agents, third party administrators, representatives, associates, servants, adjusters, attorneys and accountants (including those acting in concert with them)” from conducting any type of business on behalf of the company. That restriction would continue if the liquidation request is approved.
In April 2019, TDI hit ACCC Insurance and ACCC General Agency with a $110,000 penalty for certain practices associated with its named driver policies that the insurance department found not to be in compliance “with all laws applicable to named driver policies.” (Order No. 2019 – 5916)
TDI’s 2019 Annual Legislative Report on Market Conditions showed that for 2019, ACCC Insurance ranked 18th in terms of market share for personal auto insurance in the state, though it only held a 0.96% share of the market. The company had $221,473,617 in direct written premiums for 2019 and an underwriting loss of $17,025,329, according to TDI’s market share report.
The application for liquidation is: Cause No. D-1-GN-20-006278. The application for liquidation is due to be addressed by the Special Master, Tom Collins, on Dec. 8, 2020.
Was this article valuable?
Here are more articles you may enjoy.