The South Carolina Department of Insurance placed Capital Assurance Risk Retention Group (CARRG) in receivership for the purposes of rehabilitation.
On Oct. 31, the Richland County Court of Common Pleas issued an order placing CARRG into receivership and appointed the director of the South Carolina Department of Insurance as Receiver. The order directs the Receiver to take control of the affairs of CARRG, and places exclusive title to its property and assets in the Receiver. The order was entered because the financial condition of Ultimate Warranty Corp., CARRG’s primary owner-member, has impacted CARRG such that any future transaction of their business would be hazardous to CARRG’s policyholders and the public.
The members of CARRG included Ultimate Warranty Corp., Extended Auto Warranty, Warrentec Automotive Inc., Ultimate Warranty of Arizona, Ultimate Warranty of Wisconsin, First Warranty Group, Warranty America LLC, and Mechanical Breakdown Administrators. These members are the only insureds of the risk retention group based on the Department’s current information.
All of the owner-members of CARRG were service contract providers or obligors insured by CARRG. The owner-members of CARRG sold warranty and extended warranty contracts (also called “vehicle service contracts”) to consumers on new and used automobiles.
The Receiver with assistance from the South Carolina Department of Insurance is now managing all of the affairs of the receivership estate of CARRG and is implementing a plan to pay the claims against this estate in the most cost-effective means possible over the next 10 years until the expiration of the last underlying warranty contract.
“We are assembling a team of experts including actuaries, accountants, attorneys and other consulting firms to stabilize the financial and operating condition of CARRG and to design and implement a plan for its orderly rehabilitation, if possible,” said Scott H. Richardson, Director of the South Carolina Department of Insurance. “We are currently analyzing the financial condition of CARGG and developing a payment plan for the fair and equitable treatment of all covered claimants. Some claims will remain the responsibility of Ultimate Warranty Corporation, other member-owners of CARRG or other insurers that insured the underlying warranty obligations.”
The Receiver with the assistance of the South Carolina Department of Insurance is in the process of determining if some of the warranty contracts issued by Ultimate Warranty may be insured by other reimbursement liability policies.
Risk retention groups are not covered by the South Carolina Property and Casualty Insurance Guaranty Association or any similar associations in other states. Therefore, if a risk retention group becomes insolvent, its insureds cannot rely on the safety net provided by these guaranty associations.
If some of the warranty contracts were insured by other insurers that are not risk retention groups, then there may be some guaranty fund protection in some states. This issue is currently under review.
Information concerning Capital Assurance Risk Retention Group is available at http://www.doi.sc.gov.
Source: South Carolina Department of Insurance
Topics South Carolina
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