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HOME HOLDINGS INC. FACES BOND DEFAULT DEADLINE NEW YORK-Home Holdings Inc. failed to make an $11.6 million interest payment to bondholders last week even though there is reinsurance in place to cover the payment.
Home Holdings, parent of The Home Insurance Co., which is in runoff, has a 30-day grace period that runs to July 15 before the failure to make the payment is officially labeled a default.
The late payment is part of a series of problems that have afflicted The Home since it went into runoff in a controversial deal with Zurich Insurance Group in 1995.
The $11.6 million interest payment was due June 15 on Home Holdings notes due in 1998 and 2003. In a statement, the company said: "Home Holdings will not make this interest payment because the board of directors of The Home Insurance Co. . . .has voted to defer a decision on whether to make a dividend payment to Home Holdings."
Any cash to make the interest payment would have to come from The Home through a dividend payment to its holding company.
Under the June 1995 agreement whereby Zurich took on the profitable business of The Home but not the liabilities of the unprofitable business, Zurich provided $290 million in reinsurance that would cover the interest payments if The Home runs out of cash, in addition to a $1.3 billion reinsurance contract to cover policyholder claims.
Even though The Home may ultimately be able to make a claim under the bond-linked reinsurance contract, it may be unwilling to possibly sully its reputation further by making payments to bondholders before it makes payments to policyholders, said Alan Levin, a managing director at Standard & Poor's Corp. in New York.
Earlier this year, The Home was placed under formal regulatory supervision after it revealed much worse than expected financials (BI, March 10).
Mascotte to head BC/BS unit
KANSAS CITY, Mo.-John P. Mascotte, former chairman and chief executive officer of Continental Corp. and most recently chairman of Johnson & Higgins of Missouri, has been named president and CEO of Blue Cross & Blue Shield of Kansas City.
Mr. Mascotte's appointment comes as three senior executives stepped down from the Kansas City, Mo.-based health care company after months of legal proceedings and federal investigations.
Richard P. Krecker, president and CEO, announced his retirement. John W. Walker, executive vp and chief operating officer, and Michael T. Marcotte, vp and general counsel, resigned June 10.
A spokeswoman for BC/BS of Kansas City would not comment on reasons behind the senior executives' departures.
BC/BS of Kansas City is involved in two separate bribery investigations, according to various press reports.
A spokesman for the U.S. attorney's office in Kansas City, Mo., would not confirm or deny that any investigations are taking place. He did say that Messrs. Krecker, Walker and Marcotte have not been charged with any federal crimes.
During the recent corruption trial of former Missouri House Speaker Bob Griffin, however, a court order revealed that Mr. Walker, a witness at the trial, was the subject of grand jury testimony revolving around alleged bribes to Kansas City officials.
In a separate case, federal investigators are looking into a consulting arrangement between BC/BS of Kansas City and a public relations executive who has been indicted on charges of paying a bribe to a former councilwoman to steer a contract to Blue Cross.
The BC/BS spokeswoman would not comment on any investigations.
EMLICO appeal dismissed
HAMILTON, Bermuda-The Bermuda Court of Appeal has let stand a lower court order denying Kemper Reinsurance Co. permission to seek judicial review of Electric Mutual Liability Insurance Co.'s controversial 1995 move to Bermuda.
A three-judge appeals panel last week dismissed Kemper Re's appeal of the lower court order, which blocked judicial review of charges that EMLICO and its sole policyholder, General Electric Co., duped regulators to obtain approval for the redomestication.
Kemper Re said it will appeal the latest ruling to the Privy Council in London, the highest court of appeal for British dependent territories.
Meanwhile, Massachusetts Insurance Commissioner Linda Ruthardt responded last week to a scathing report on the EMLICO redomestication by state legislative investigators (BI, June 9).
In a letter to Rep. James H. Fagan, chairman of the House Post Audit & Oversight Committee, Commissioner Ruthardt said her approval of the EMLICO redomestication was supported by the regulatory review that preceded the decision.
The redomestication has also done no harm to those with environmental claims against GE, and there has been no showing that EMLICO's reinsurers will be damaged, she wrote.
Defending a proposed settlement in which the Massachusetts Insurance Division would become ancillary receiver for EMLICO, she added that she has "no practical choice" but to recognize EMLICO's status as a Bermuda company.
"My staff and I have spoken directly to our counterparts in Bermuda and have been advised that EMLICO can only be 'brought back to Massachusetts' by an act of the Bermuda Parliament," she wrote. "Notwithstanding my own frustrations with that state of affairs, I see no gain from years of litigation which has little chance of achieving any practical result."
Vermont reforming captive law
MONTPELIER, Vt.-Vermont Gov. Howard Dean is expected to sign a bill passed by the Vermont Legislature that changes the state's captive insurance law to allow captives to form as reciprocal insurers and allows single-parent captives to include controlled unaffiliated business in their programs (BI, April 14).
Under the measure, H. 529, the unaffiliated business would still have to be somehow connected to the captive sponsor's business. The bill also would extend confidentiality protection to state files on captive companies and adds a new captive examiner position to the captive division of the state's Department of Banking, Insurance, Securities and Health Care.
Maine allows captive insurers
AUGUSTA, Maine-Companies can form captive insurance companies in Maine beginning Sept. 1 under a new law signed by Gov. Angus King earlier this month.
The law, L.D. 1787, makes Maine the first U.S. domicile to allow captives to write insurance for "controlled unaffiliated business," which is defined as business that has a contractual relationship with the parent or an affiliated company and follows certain risk management guidelines. However, that advantage will be short-lived, as a bill awaiting the governor's signature in Vermont-the nation's largest captive domicile-also would allow captives to write controlled unaffiliated business.
Maine's minimum capitalization requirements mirror those of Vermont: $250,000 for single-parent captives, $500,000 for industrial insured captives and $750,000 for association captives.
The law also contains confidentiality provisions, streamlined redomestication procedures and lower licensing fees for existing captives that move to Maine and a tax structure similar to Vermont but with a lower rate and minimum tax. The law also allows for the formation of non-profit captives. Maine captives may offer insurance for all property/casualty lines, credit life and health, marine, title and surety. Workers compensation coverage must be fronted.
Aon execs' roles expand
CHICAGO-The ongoing integration process at Aon Group Inc. has resulted in expanded roles for some of the Chicago-based broker's top executives.
Dirk P.M. Verbeek, chairman of Aon Risk Services Cos. Inc. of Europe, Asia, Africa and Australia, has been named chairman and chief executive officer of Aon Risk Services World Wide.
Ron Forrest, who was named chairman of Aon Risk Services of the Americas late last year, is moving back to London to expand his role as vice chairman of Aon Risk Services World Wide and chairman and CEO of Aon Risk Services Cos. Inc. of Europe, Asia, Africa and Australia.
Richard A. Riley, president of Aon Risk Services Cos., was named vice chairman of Aon Risk Services World Wide and chairman and CEO of Aon Risk Services of the Americas.
Swett CEO steps down
LOS ANGELES-Warren S. Stanley, president and chief executive officer of Swett & Crawford Group, Minet Group's insurance wholesale unit, has left his post to explore other opportunities.
A spokeswoman for the Los Angeles-based wholesaler said Mr. Stanley is pursuing possible opportunities within Aon Group Inc., which recently purchased Minet, and remains a senior adviser to the Swett & Crawford team.
In the meantime, David R. Hartoch, president of the southern division and chief operating officer of Sherwood Insurance Services, Aon's wholesale unit in San Francisco, is the interim president and CEO of Swett & Crawford.
In a separate move, three former Swett & Crawford employees have formed their own wholesale brokerage firm.
Patrick Hanley, former vp of Swett & Crawford, is the new president of San Francisco-based ECM Surplus Lines Brokers. Zulma Marquez and Paul Lefcourt are both senior vps of the new firm.
ECM provides placement of directors and officers, errors and omissions, employment practices and other related liability coverages.
Judge won't stop AIG ads
SAN FRANCISCO-A judge last week rejected a request by the California Department of Insurance and Liberty Mutual Insurance Co. that he order American International Group Inc. to stop its advertising campaign for California workers compensation business.
In the latest tiff over the awarding of Golden Eagle Insurance Co. to Liberty Mutual (BI, June 9), the DOI and Liberty Mutual argued June 18 before San Francisco Superior Court Judge William Cahill that AIG has been creating uncertainty among Golden Eagle policyholders and engaging in unfair competitive practices.
At issue are advertisements AIG has run in several California newspapers. It states that the court's decision that Liberty Mutual rehabilitate Golden Eagle "remains in dispute." AIG is appealing the San Francisco Superior Court's May 30 decision to award the sale of Golden Eagle to Liberty Mutual.
Karl Rubenstein, deputy conservator and president of Golden Eagle, and a spokesman for Liberty Mutual both said Judge Cahill agreed the advertisements are misleading. However, he refused to stop the advertising because of First Amendment concerns, Mr. Rubenstein said.
AIG declined to comment.
A second suit has been filed challenging the San Francisco domestic partner benefits law that went into effect June 1. This suit, brought by a local electric contractor, is supported by the American Center for Law & Justice, a legal group backed by Pat Robertson, and claims the law is pre-empted by federal laws and violates the U.S. Constitution. The first suit challenging the law was filed by an airline association in May. (BI, May 19) . . . .Families of 28 victims of the October 1996 crash of AeroPeru Flight 603 filed a product liability suit for an unspecified amount against the plane's manufacturer, Seattle-based Boeing Co., in federal district court in Miami last week. A Boeing spokesman had no comment (BI, Oct. 7, 1996) . . . .HCC Insurance Holdings Inc. last week purchased Continental Aviation Underwriters Inc. for an undisclosed price. E.R. "Butch" Kinnebrew III, founder and president of Memphis, Tenn.-based CAU, will remain its chief executive officer after the merger, and the company will retain its name. HCC specializes in general aviation through its two Houston-based surplus lines subsidiaries Houston Casualty Co. and Trafalgar Insurance Co.