INDIANA SEIZES INSURERPosted On: Dec. 21, 1997 12:00 AM CST
INDIANAPOLIS -- Indiana regulators have seized control of Classic Fire & Marine Insurance Co., a property/casualty insurer and affiliate of two now-defunct syndicates on the Illinois Insurance Exchange.
The Indiana Insurance Department obtained a rehabilitation order Dec. 10 against Classic Fire, charging that its policyholder surplus may be overstated and noting "significant turnover in management," including resignations this year of its president, vp-general counsel and corporate secretary.
An Indiana state judge also issued a seizure order allowing regulators to take possession of the Concord, Calif., offices of Concord General Corp., Classic Fire's parent company, and several affiliates. These include JBW & Co. Inc., Concord Information Systems Inc. and Lobo Claims Management Inc., court records show.
The orders are the latest blow to the crumbling insurance empire of California businessman Jeffrey W. Beresford-Wood, owner of Concord General and JBW. In September, United Southern Assurance Co., a Classic Fire unit writing commercial auto coverage in Florida, agreed to be liquidated by Florida regulators.
In July 1996, Illinois regulators placed Geneva Assurance Syndicate Inc., an IIE syndicate owned by United Southern and JBW, into liquidation.
Classic Syndicate Inc., another IIE member and Classic Fire subsidiary, withdrew from the exchange in 1995 and was absorbed by its parent company.
Mr. Beresford-Wood and Bob Roy, Classic Fire's chief executive, could not be reached.
Classic Fire, based in Crown Point, Ind., wrote a variety of surplus lines and reinsurance coverages, including taxicabs, commercial auto, garagekeepers liability and one-day event covers. The insurer's biggest-volume year was 1994, when it wrote gross direct premiums of $73.8 million, according to figures published by A.M. Best Co.
By 1996, Classic Fire's direct volume had dwindled to only $2.8 million and the bulk of its remaining business consisted of reinsurance of United Southern's auto risks, according to Best.
Indiana regulators filed their rehabilitation petition against Classic Fire in Marion County Circuit Court in Indianapolis Dec. 10.
According to the petition, the insurer's financial condition has deteriorated rapidly since the end of 1996, when it reported having $139.6 million in admitted assets and $12.2 million in policyholders surplus.
On Sept. 18, the petition notes, United Southern was ordered into liquidation in Florida, resulting in a "significant reduction" of Classic Fire's capital and surplus.
In its Sept. 30 quarterly financial statement, Classic Fire's total assets had fallen to $104.8 million and its surplus had been cut nearly in half, to $7 million, the filing says.
A large part of the $104.8 million in assets, regulators added, is held in a trust set up in Illinois to cover liabilities of Classic Syndicate after it withdrew from the IIE.
In addition, Classic Fire's surplus "may be overstated" by another $2.9 million to $4.6 million, which would put it in the "mandatory control level" under statutory risk-based capital guidelines, the petition says.
The Indiana department also said it "does not have confidence in the competence and continuity" of Classic Fire's management. Since January, several top officials have resigned, including President James H. Ryan, Vp and General Counsel Brian D. Bethke and Corporate Secretary Alexandra G. Jensen.
Along with the rehabilitation order, Indiana regulators also obtained an order to seize offices not only of Classic Fire but also of parent Concord General, JBW and affiliated companies.
Indiana Insurance Department officials had taken control of those offices last week, according to Richard T. Freije Jr., a lawyer with Baker & Daniels in Indianapolis, representing the department.
Meanwhile, shortly after the rehabilitation petition was filed, regulators completed a complex restructuring of liabilities and other transactions related to Classic Fire's defunct IIE affiliates, Mr. Feije confirmed.
In December 1995, regulators and Concord General officials had reached an agreement under which Geneva -- then in runoff -- reinsured all of its liabilities with Classic Syndicate, which then withdrew from the exchange and was absorbed into Classic Fire (BI, Jan. 8, 1996).
As part of the reorganization, Geneva and Classic Syndicate put virtually all of their assets in trust funds in Illinois. The inactive Geneva was ordered liquidated several months later (BI, July 15, 1996).
Indiana regulators and Illinois officials liquidating Geneva started negotiating a commutation of Classic Fire's reinsurance obligations to the Geneva estate several months ago, and a deal was finalized last week, Mr. Feije said.
Under the agreement, Classic Fire commuted all of its liabilities to Geneva for a cash payment and a transfer of stock in an affiliate of Exstar Financial Corp. of Solvang, Calif., he said.
The agreement also included a restructuring of various other transactions between companies controlled by Mr. Beresford-Wood and affiliates of Exstar, which is controlled by Peter J. O'Shaughnessy, Mr. Freije said.
Exstar is the parent of Illinois-domiciled Alpine Insurance Co. (BI, Aug. 19, 1996). Another Exstar unit, Transco Syndicate #1 Ltd., transferred its assets and liabilities to Alpine after withdrawing from the IIE at the end of 1995, according to Best.
Companies operated by Mr. Beresford-Wood and Mr. O'Shaughnessy entered a number of financial deals over the past decade, one of which at one point involved a pledge by Mr. Beresford-Wood of Classic Fire stock, Securities and Exchange Commission filings show.
The terms of the commutation between Classic Fire and Geneva are confidential, according to Dick Darling, chief operating officer of the Illinois Insurance Department's Office of the Special Deputy Receiver.
Exstar officials could not be reached.