5 Offshore Insurers Ordered to Stop Sales

Insurance Commissioner John Garamendi on Monday ordered brokers to stop selling policies from five unlicensed, Caribbean-based insurers that he said are financially shaky. One of the firms apparently is unable to pay millions of dollars worth of claims for commercial losses suffered in the recent riots.

Pacific Fire & Marine Insurance Co. of the Turks and Caicos Islands had an estimated 40 riot-related claims totaling $3 million to $4 million, but has a surplus of “no more than $224,406--far below any amount acceptable or adequate to pay claims,” Garamendi said.

The other companies Garamendi cited were: Southern Continental Insurance Co., West Atlantic Insurance Co. and Windsor Insurance Co., all of Turks and Caicos, and Tiberian Insurance Co., based “somewhere in the British West Indies,” Department of Insurance spokeswoman Elena Stern said.

Beyond the figures for Pacific Fire & Marine, Garamendi’s office was unable to estimate how many policies had been written by the five companies or what dollar amount of claims had been filed.

Two of the companies had earlier volunteered to withdraw from the California market, Stern said, but Garamendi’s office delayed notifying brokers that they should stop doing business with them. Meanwhile, both firms continued selling policies.

The state has no direct authority over such unlicensed--or “non-admitted”--insurance companies but allows them to sell policies in California only through specially licensed dealers called surplus lines brokers.

Some non-admitted carriers are well-capitalized and well able to cover claims.

Others amount to little more than an offshore mail drop used as a platform for selling low-priced policies whose coverage is worthless.

Southern Continental last Feb. 5 informed the Surplus Lines Assn. of California, a brokers trade group, that it would stop doing business in California, Stern said. West Atlantic wrote Garamendi’s office April 17, making a similar announcement, she said.

However, it was not until May 27--six weeks after receiving the letter from West Atlantic--that Garamendi’s office officially notified the Surplus Lines Assn. that its brokers should stop selling policies from those two firms.

Stern said she had no explanation for the delay.