Completion Bond Halts Insuring of Film Productions : Motion pictures: Transamerica Insurance Group orders its Hollywood guarantor unit to stop underwriting new policies.

Transamerica Insurance Group has ordered its Completion Bond Co. unit to stop issuing insurance coverage on motion picture productions until Transamerica goes public.

What isn’t known is whether the unit will resume writing new business after the stock sale.

Transamerica Insurance, a property-casualty insurer based in Woodland Hills, is a subsidiary of Transamerica Corp., the San Francisco financial services giant.

But Transamerica Insurance’s newly created parent, TIG Holdings Inc., is spinning off about 70% of its stock to the public in an offering that’s expected to be completed and begin trading today.

Completion Bond guarantees, for a fee, that independently produced motion pictures will be completed on time and within budget.

Over the years, it has guaranteed films with aggregate budgets of nearly $3 billion and is generally acknowledged to be Hollywood’s biggest guarantor. Some movies, such as Academy Award-winning “Driving Miss Daisy,” might never have been made without Completion Bond’s guarantee.

Although Completion Bond does not pay losses on most films, some not-so-good publicity has resulted from cost overruns on a few films. In those cases, Completion Bond has the option of taking over production to try to stem its losses.

Last year, the company’s president, Bette L. Smith, was publicly berated by director Spike Lee when his “Malcolm X” went over budget and Completion Bond ordered some work stopped. Lee was bailed out by friends such as Bill Cosby and Oprah Winfrey, who paid to finish the film.

Some observers have speculated that Completion Bond’s hiatus could be tied to losses on that and other films, including the animated “The Thief and the Cobbler.”

Steve Fayne, an attorney for Completion Bond, said that TIG’s management began the moratorium on guaranteeing film completions on March 31 but offered no other explanation or indication what will happen after the stock sale. “Then we’ll all sit down and figure out what next.”

TIG executives did not return phone calls.

Based in Century City, Completion Bond was founded in 1981 and acquired by Transamerica in 1990 for undisclosed terms. Its revenues aren’t broken out, but Completion Bond contributes just a tiny part of TIG’s $2 billion in annual revenue.

Questions have also been raised about Transamerica’s commitment to the film guarantee business because price-cutting among Completion Bond and its competitors has reduced their fees from 3% of a film’s budget to as little as 1%.

“It has been pretty cutthroat in the market since we came in three years ago,” said Steve Cardone, senior vice president of business and legal affairs at International Film Guarantors, the third-largest film guarantor behind Completion Bond and its biggest rival, Film Finances Inc.

“Chances are that in trying to corner a bigger portion of the market their chances increased of having problem pictures,” Cardone said of Completion Bond. “At the same time, they’re receiving lower premiums for their risk.”

Fred Milstein, a Completion Bond vice president, called the “Malcolm X” losses “old news” and said that there have been few problems with the vast majority of the 100 to 120 films the company guarantees each year.

Some recent films it has guaranteed are “A River Runs Through It,” “Under Siege” and “Sommersby.”

Milstein acknowledged that prices are down, but said, “We never quoted a 1% fee.”

He also said that Film Finances and International Film Guarantors were taking advantage of Completion Bond’s absence and charging higher rates.

“Rates simply have to go back up to a healthier point if this business is going to continue,” he said.