Auto Policies Off-Limits for Central Insurance : Regulation: The state says the firm--which has ties to FGS--is not licensed in California.

An offshore insurance firm with close ties to embattled FGS Insurance Agency in Irvine was ordered by state regulators Monday to stop selling automobile policies in California.

The state Department of Insurance issued a cease-and-desist order against Central Insurance Co. Ltd. saying the company--whose policies are marketed aggressively by FGS--is not licensed in California and does not have sufficient verifiable assets to pay claims.

The state previously charged that FGS lacks the proper license to sell policies underwritten by Central, said Dennis Ward, a Department of Insurance investigator. FGS faces a license revocation hearing on Sept. 11.

Neither FGS nor Central officials could be reached Monday for comment on the state’s ban on Central.

But FGS officials recently charged that the Department of Insurance is conducting a vendetta against their company based on events alleged to have occurred when it was still owned by Coastal Insurance Co. Coastal was one of the state’s largest writers of high-risk auto liability insurance policies before filing for bankruptcy in February, 1989.

State records indicate that Central is controlled by two men who also own two-thirds of FGS.

Ward said that Central, registered in the British Virgin Islands, is controlled by Michael Griffiths and Richard Adeline, both of Florida.

The two men, with FGS President Alan Greenberg, recently acquired FGS from Sidney M. Field, Ward said. Each man owns one-third of the company. Ward said a change-of-ownership statement for FGS was dated June 1 but was not received in an appropriate form by state insurance regulators until earlier this month.

Earlier this year, insurance regulators had demanded that Field sever all ties with FGS as one step toward resolving problems they had with the concern. On April 19, the state charged FGS with engaging in illegal sales activity and sought to take away its license.

The state alleges that FGS agents:

* failed to tell customers that they were being placed in the state’s assigned-risk auto insurance plan;

* failed to disclose the high interest rates they would be charged for financing their insurance premiums through a private lender working with FGS;

* and failed to disclose that there were installment payment plans available through the assigned-risk program that cost only $2 per installment payment, contrasted with 20% to 40% per year interest rates for the private financing arranged by FGS.

The state has also charged that FGS helped another offshore insurer, Premier Assurance & Casualty, do business in California without having the proper license. Premier subsequently was ordered to stop selling policies in the state.

Although Central is registered in the Virgin Islands, there is no telephone number listed for the company on the main islands of Tortola and Virgin Gorda. Ward said Central has been “doing business directly (in California) using the facilities of FGS.”

He said there are two other insurance brokers in the state known to sell Central policies but that both are properly licensed to do so.

Ward said the only financial information on Central that the Department of Insurance has seen are unaudited statements from September and December, 1989. Those statements show that the company’s only assets are $5 million worth of marketable securities, he said.

“But the statements also show that the $5 million was borrowed from a related company, and that loan doesn’t show up in the liability column of Central’s statement, as it should,” Ward said. “When you put it there, the end result is that it cancels the $5 million in assets.”

A Sept. 26 hearing has been scheduled by the Insurance Department to determine whether to permanently bar Central from selling insurance in the state.