Majestic Insurance Co. rises quickly, falls much faster.
Chronicled in a couple of my previous posts, is the tale of how not to attack your way into the California Workers Compensation marketplace. If you review my blogs dated May 3rd, and November 3rd of 2010, you will get background on the saga of Majestic Insurance Company and its parent Company CRM. Recently, I received updated information concerning Majestic, with this release from a Work Comp Executive Flash Report dated Monday March 21, 2011.
In its entirety:
“Majestic Heads for Conservation
California’s Majestic Insurance Company is girding itself for a likely conservation action by the California Department of Insurance (CDI) after its parent company’s planned merger fell through. Bayside Capital Partners is terminating its merger agreement with Majestic Capital (Nasdaq: MAJC), which also ran the failed Compensation Risk Managers (CRM) group self-insurance units.
Bayside cites a material deterioration in Majestic Capital’s capital surplus, an inability to secure regulatory approval for the merger, and a failure to satisfy the closing condition with respect to termination of Majestic Capital’s lease for office space in Poughkeepsie, New York on terms acceptable to Bayside.
As a result Majestic canceled a special meeting of its shareholders and announced plans to protect its remaining assets through bankruptcy.
Company officials also announced that Majestic Insurance entered into a non-binding letter of intent to sell its renewal rights to AmTrust Financial Services and AmTrust would assume Majestic Insurance Company’s loss reserves and in-force insurance business through a loss portfolio transfer and 100% quota share reinsurance agreement.
Such a move will have to be approved by CDI. Pending the closing of the transactions, Majestic Insurance Company will arrange for workers’ compensation insurance policies to be underwritten by the AmTrust group companies and reinsured by Majestic Insurance Company under the previously announced 90% quota share reinsurance agreement.
It is an ignoble end to feisty little California carrier.
Filed by Brad Cain in San Francisco”
Apparently Am Trust will attempt to step in for the run-off claims and the renewal opportunity, but that is all at the hands of the California Department of Insurance, who could just sweep the entire thing into conservation and start making decisions on behalf of the troubled carrier. Majestic hit the ground running with incredibly low rates and quickly gobbled up large chunks of the contractor and agricultural marketplace in California. The old adage, “If it is too good to be true, then it probably is” comes to mind.
At Van Beurden, we have long guided employers down the real path to savings by putting our clients into carriers that we can trust, and then working on their experience modification through our proven Work Comp Navigator system, in order to truly realize low costs.
The big question will be who will be responsible for handling the thousands of currently open claims that Majestic has on the books? It is my experience (i.e. Superior National and Cal Comp circa 2000 and several others here http://www.caclo.org/perl/insolvent.pl ), that these claims may fall into sort of a black hole for a while with benefits ceasing, or at the very least extremely delayed in processing. Insured clients will also probably have to deal with no real correspondence or communication at all with the conserving body or entity. I would have to say that it adds to the life and length of claims immeasurably. The results of conservation can cause modification problems with the insured employers. This is not good for employers that trusted their insurance advisor to place their business with a carrier that would not put them at risk, and doubly bad for the brokers who pitched price over conscience and put their clients at risk.
If you are currently insured with Majestic, and would like to talk about the issues as they come at you, please feel free to contact me at firstname.lastname@example.org , and I will try and help you in any way I can.