Mission Insurance Gets New Reorganization Plan
Mission Insurance and the state Department of Insurance announced Tuesday a new agreement for the rehabilitation of the Los Angeles-based insurer, which was declared insolvent and placed under state conservatorship late last year.
Under the plan, which will be presented to a Los Angeles Superior Court judge on March 6, most of the financial obligations of Mission Insurance and its subsidiaries would be assumed by Mission American Insurance, California Insurance Commissioner Bruce Bunner said.
Mission American Insurance is a subsidiary of Los Angeles-based Mission Insurance Group, which was established as part of a rescue effort by Mission Insurance Group’s major shareholder, privately held American Financial Corp. of Cincinnati. Mission Insurance Co. is also a subsidiary of Mission Insurance Group.
Ailing Mission Insurance’s primary business was writing direct liability, property and workers compensation insurance policies as well as administering reinsurance pools in which Mission would reinsure other companies’ policies, assuming part of the risk in exchange for a share of the premium payments. Mission Insurance would then parcel out some of the risk to yet another layer of reinsurers.
The new plan calls for Mission Insurance’s major creditors--companies whose policies Mission Insurance reinsured--to forgive claims against Mission Insurance in exchange for an equity stake in Mission American Insurance. Those creditors will also receive a share of company profits for 10 years, Bunner said.
Under the old plan announced in November, Mission American would have assumed only the direct liability, property and workers compensation business, and the major creditors, known as “ceding” insurers, would have been left with assets insufficient to cover claims, Bunner said.
The plan calls for American Financial to infuse $75 million in new capital into Mission American, Bunner said.
“Under the old plan, the reinsurers were out in the cold and the bondholders (of Mission Insurance) were out in the cold because direct policyholders would have consumed it all,” Bunner said.
