AM Best on Wednesday said the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of California Insurance Co. and its pooled insurance affiliates, collectively referred to as North American Casualty Group, remain under review with negative implications, despite regulatory action regarding the company.
AM Best took action on the ratings on Oct. 31, downgrading the Long-Term Issuer Credit Ratings to “a” from “a+” and affirming the Financial Strength Rating of A (Excellent) of CIC.
AM Best has been informed by the California Department of Insurance that CIC continues to operate with roughly $590 million of policyholder surplus, as it has since June 30.
AM Best said it remains in close dialogue with the company management, as they work to resolve outstanding regulatory issues.
A California judge appointed CDI as conservator of the company on Nov. 4 after the state regulator legally challenged the company’s merger and relocation to New Mexico.
The court order directs the conservator to take immediate possession of the workers’ compensation insurer in response to what the CDI has argued is a willful violation of state law and established pattern of continually flouting California’s regulatory processes.
The CDI sought the order after company officials agreed merge its business with a New Mexico-based insurer without first securing the CDI’s prior approval.
This is the latest development in the growing drama behind the $920 million sale of Berkshire Hathaway-owned Applied Underwriters to its founder Steven Menzies.
The New Mexico Office of Superintendent of Insurance in late October said New Mexico facilitated the sale of Applied Underwriters by approving the creation of a new insurer and a merger of it with an existing Applied Underwriter California subsidiary in order to save jobs and protect policyholders.
The California Department of Insurance has argued that its approval of the sale is required because one of Applied’s subsidiaries, California Insurance Co., is domiciled in the state. Earlier in October, California said that it had not approved the sale of Applied Underwriters, nor had it approved the re-domestication of the California subsidiary to New Mexico.
Applied Underwriters executives followed that up earlier this week by maintaining publicly that after six months they gave up waiting for California to act on their request for approval of the sale and instead took up another state, New Mexico, on its offer to expedite the transaction by moving its California subsidiary to that state.
AM Best in its notice on Wednesday said its intent is to complete a comprehensive review of the groups’ balance sheet strength, operating performance, business profile, and enterprise risk management over the near term and to resolve the current under review with negative implications status once all regulatory disputes are resolved.
Was this article valuable?
Here are more articles you may enjoy.