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CHICAGO-A Cook County Circuit Court judge last week found an Illinois Insurance Exchange syndicate insolvent by at least $3.5 million and placed it in liquidation at the joint request of the syndicate and the Illinois insurance director.

Separately, Illinois regulators and IIE officials are negotiating to tighten a bill that would increase the Illinois department's oversight for the largely independent exchange.

Resure Inc. Syndicate, a wholly owned subsidiary of Las Vegas-based Talon Re Holdings Inc., is the third IIE syndicate to be placed in liquidation in the past several months (BI, Oct. 14, 1996).

Based on 1995 premiums of $13 million, Resure was the sixth-largest of 10 syndicates then on the exchange (BI, Sept. 16, 1996). However, Resure has not written new business since December 1996.

When the Insurance Department stepped in, Resure had $2.2 million in unpaid claims and loss adjustment expenses and did not meet the IIE's minimum solvency margin of $3.5 million.

Most of its losses stem from legal expense obligations and deteriorating claims from contractors' liability coverage written by a managing general agent in California from 1990 to 1994, said Resure President and Treasurer Wolfgang D. Daniel.

Resure takes part in the IIE's $35 million guaranty fund, which is designed to provide up to $300,000 per claimant, up to an aggregate $15 million, per insolvency.

In response to the syndicate insolvencies, the IIE hopes an oversight bill introduced last month in the Legislature would help improve its stability and credibility, said James E. Tait, IIE president and chief executive officer. The bill would require state insurance regulators to examine the IIE's financial records regularly, impose stricter financial reporting requirements and reject any new or modified IIE operating rules that regulators consider threatening to policyholders.

While the Insurance Department supports the concepts, "the bill doesn't go far enough," said Chief Deputy Director Arnold L. Dutcher. Syndicates should be subject to greater solvency standards, and the department should have even broader authority over them individually, he said.