California Insurance Commissioner Dave Jones announced on July 8 the “successful implementation” of a court-approved rehabilitation plan for Majestic Insurance Co., a plan that has been opposed by New York officials and some of Majestic’s contractor customers.
Designed to protect Majestic’s policyholders and claimants from loss due to Majestic’s failure, the plan called for the company’s liabilities and certain assets to be transferred to AmTrust Financial Services Inc., which will assume responsibility for majestic policyholder claims.
Jones said that the loss portfolio transfer of Majestic’s liabilities was completed July 1.
AmTrust’s lead underwriting company, Technology Insurance Co., is administering Majestic’s workers’ compensation claims. Meanwhile, insurance brokers are able to submit Majestic renewals and new business opportunities to AmTrust’s insurance units under the plan.
Jones said some California employees of Majestic will keep their jobs.
“Our rehabilitation plan not only protects all of Majestic’s claimants and policyholders from any loss or payment delay, but in the process we saved more than 80 jobs at the company’s California offices who, as AmTrust employees, will work to grow AmTrust’s California workers’ compensation business and create more jobs,” he said in a statement.
California-domiciled Majestic was licensed to write property/casualty insurance in 17 states. The company sold workers’ compensation coverage to employers in states including California, Nevada, Arizona, New York and New Jersey.
AmTrust Financial Services Inc. is an insurance holding company headquartered in New York. It sells workers’ compensation, commercial automobile and general liability, as well as extended service and warranty coverage through its primary insurance subsidiaries, which are rated “A” (Excellent) by A.M. Best. In addition to Technology Insurance, AmTrust’s subsidiaries include AmTrust International Insurance, Rochdale Insurance Co., Wesco Insurance Co., Milwaukee Casualty Insurance Co., Security National Insurance Co. and Associated Industries Insurance Co.
The California Department of Insurance seized Majestic Insurance on April 21, after the California Superior Court, County of San Francisco, declared the workers’ compensation carrier’s surplus was insufficient for it to continue operating without a conservator.
Officials said the San Francisco-based carrier, a unit of Majestic Capital Ltd., had underfunded reserves of $46.4 million.
Majestic’s rehabilitation plan was opposed by former members of the self-insured workers’ compensation program, Contractors Access Program (CAP) of California, which was managed by Majestic.
The former CAP members said that Majestic’s assets, “achieved in part by its wrongful acts,” should not be transferred to AmTrust. The failed CAP, they said, left contractors with hundreds of thousands of dollars of workers’ compensation liability. They criticized the plan that they said does not provide for pre-conservatorship claims.
“The rehabilitation agreement does not account for the pending litigation by contractors and others in California and the obligations of Majestic Insurance Co. to former members of CAP,” their formal opposition letter read.
The New York State Workers’ Compensation Bureau (NYSWCB), meanwhile, questioned the commissioner’s finding that Majestic was under-reserved by $46.4 million. Majestic’s financial difficulties began in 2009, after the New York board sued the company and its parent Majestic Capital Ltd., seeking more than $400 million for losses resulting from the failure of several workers’ comp trusts. The rating downgrade that followed led to a decrease in premiums and increased losses, the company said.
Bermuda-based Majestic Capital filed for bankruptcy April 29, listing $50 million in debts in its Chapter 11 filing to the U.S. Bankruptcy Court in the Southern District of New York.
The California Court accepted California Commissioner Jones’ rehabilitation plan for Majestic, essentially overturning objections.
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