Garamendi Bars Nearly 250 of State’s Insurers : Regulation: Order hits companies that failed to provide financial information. Meanwhile, a Marina del Rey brokerage is seized.

Declaring that Californians have lost hundreds of millions of dollars to “fly-by-night operators,” Insurance Commissioner John Garamendi on Thursday issued a blanket order barring nearly 250 unlicensed insurers from selling policies in California.

Garamendi also announced the seizure of a Marina del Rey insurance brokerage suspected of “illicit” insurance activity.

The companies banned on Thursday failed to file financial statements with the Insurance Department as required under regulations that took final effect last week. Garamendi said that of the 365 unlicensed carriers known to have sold insurance here this year, only 118 complied with the regulations. The remaining 247 were banned.

“If they haven’t provided the financial information we require, there is a significant chance that they don’t have the resources to meet our standards,” Garamendi said in a press conference at the State House in Sacramento on Thursday morning.

The new regulations require that before selling insurance in this state, carriers that are unlicensed in California must file statements demonstrating that they have at least $15 million in capital and surplus, plus--for foreign-based companies--at least $5.4 million in a U.S.-based trust account.

In recent years, foreign insurers--particularly Caribbean-based ones--have exploited loopholes in state law to sell worthless insurance to Californians. Some companies are set up with the express purpose of defrauding people, while others simply lack the financial strength to pay claims, insurance regulators have said.

Most of the offshore scams have involved auto insurance, but phony health and business coverage has also been sold. Garamendi has blamed unlicensed offshore carriers for millions of dollars in unpaid claims stemming from last year’s Los Angeles riots.

Garamendi said the commissioner needs stronger authority to crack down on fraudulent or financially weak insurers that are not licensed in California. Under the law now, such companies are permitted to sell policies here as long as they are sold through specially licensed “surplus lines brokers.”

Under legislation pending in the state Senate, which Garamendi endorsed, unlicensed carriers could not sell insurance here until the commissioner had approved them after reviewing their financial statements.

Since taking office in 1991, Garamendi said he has banned 78 companies from selling insurance in California. But Thursday’s action was the first mass ban.

Also on Thursday, Garamendi announced that the department had seized Toma Surplus Lines Insurance Brokers of Marina del Rey, one of California’s largest surplus lines brokerages. The department has also sought a temporary restraining order against International Insurance Underwriters, a Washington state-based insurance agency that worked with Toma.

Garamendi accused Toma of illegally “renting” its surplus lines brokerage license to IIU, allowing IIU to sell policies from unlicensed insurers directly to Californians. Five of the six unlicensed companies whose policies IIU sold had previously been banned from operating in California, Garamendi said.

Garamendi also suspended John D. Nordstrom of San Diego, majority owner of Toma and IIU, from employment with Toma. In addition, the department sought a restraining order barring Nordstrom and other officers of the two companies--Robert M. Thul, Larry Hoehne and Thomas Wallace Whitaker Jr.--from transacting insurance business in California.

The department said that while Toma apparently sold $17 million worth of insurance in California in 1992 alone, investigators were able to find only $37,000 in bank accounts that were seized and frozen.