The Second Judicial Circuit Court in Leon County, Florida ordered National Group Insurance Company, a subsidiary of Hato Rey’s embattled National Insurance Company, into receivership earlier this week, News is my Business learned.
The order activated the state’s Department of Financial Services into action, which will now oversee the insurance company’s rehabilitation, the agency said.
“During rehabilitation, the receiver will continue to process and pay claims in the ordinary course of business to the extent possible,” the agency added.
NGIC, which began doing business in Coral Gables in 2004, stopped writing new and renewal insurance coverage around June 24, 2011 as a result of its financial problems.
“The company’s existing policies are not cancelled by the rehabilitation court order and will continue in the ordinary course of business. Policyholders with installment payment plans should continue to pay premiums as usual in order to continue their insurance coverage with NGIC,” the Department of Financial Services said of the company that has approximately 10,500 policyholders.
The Florida court’s order comes less than three months after the Office of the Puerto Rico Insurance Commissioner intervened with NIC, which in the months leading up to the shakeup had been weakened by a number of factors: ongoing poor operating performance inclusive of adverse reserve development, an increase in non-admitted assets driven by uncollected premium balances and a reduction in NIC’s carrying value, credit ratings agency A.M. Best said at the time.
While Insurance Commisioner Ramón Cruz has remained mum since taking over NIC’s supervision, NIC officials have told their employees the company will move forward.
A.M Best downgrades
Adding to the insurance companies’ troubles, A.M. Best said Wednesday it downgraded NIC’s financial strength rating (FSR) to E (Under Regulatory Supervision) from D (Poor) and issuer credit rating (ICR) to “rs” from “c,” in response to the developments in Florida.
In May, the reputable agency downgraded NIC’s FSR to E and its ICR to “rs.”