News for 'TGIC' - (Update: Illinois Places Triad Guaranty Into Rehabilitation; Company Says Liquidation Is Likely Result)
CHICAGO, Dec 12, 2012 (A. M. Best via COMTEX) -- (Update: Corrects information
in the first paragraph.) The Illinois Department of Insurance has reached a
rehabilitation ag! reement with North Carolina-based Triad Guaranty Insurance
Corp. and a subsidiary, Triad Guaranty Assurance Corp., that will allow the
state to restructure the companies' business. Meanwhile, the company issued a
statement indicating the move likely would result in the overall holding
company, Triad Guaranty Inc. undergoing Chapter 11 bankruptcy proceedings.
The rehabilitation order has been approved by the company boards of directors
and was filed in Cook County Circuit Court, which entered a finding of
insolvency against the two companies.
The legal actions are the offshoot of two earlier corrective orders under which
Triad has been operating. The two companies voluntarily ran off of their books
of business in 2008 after being hit hard by a wave of foreclosures during the
housing crisis (Best's News Service, June 20, 2008). In 2009, former Illinois
Director of Insurance Michael T. McRaith, who is now in charge of the Federal
I! nsurance Office, gained a court order that held out Triad payments to 60% of
claim values. Under that order, 40% of all valid claims lodged against Triad
after June 1, 2009 were withheld as deferred payment obligations (Best's News
Service, April 3, 2009). As part of the 2009 corrective order, Triad was
required to set aside invested assets into an escrow account in an amount equal
to the combined deferred payment obligations and the interest accrued.
But the court's new insolvency finding states on Sept. 30, the company reported
its deferred payment obligation was $765 million, which exceeded cash and
invested assets of Triad at that date.
By state law, Illinois DOI Director Andrew Boron now becomes the statutory
rehabilitator of both companies. The restructuring involves assuming the
company's affairs but refusing to take on new obligations or issuing new or
renewing policies. Boron is vested with the title to the companies' prop! erty,
assets, lawsuits, books, records and premises. Boron is preparing to file a new
rehabilitation plan within 45 days to address payment of claims by creditors,
including mortgage lenders Fannie Mae and Freddie Mac and other banks.
Triad Guaranty, Inc. issued a Dec. 11 statement stating the rehabilitation
action would negatively impact its ability to fund its operations. "Triad
Guaranty Inc. expects that this action will likely lead it to commence winding
up its business and liquidating through a Chapter 11 bankruptcy proceeding or
other liquidation proceedings, although the timing of the institution of such a
proceeding has not been determined," the statement said.
On Dec. 10, the Illinois DOI approved reimbursement by Triad of $734,000 of
Triad Guaranty Inc. expenses on behalf of Triad. The company's statement said
the new rehabilitation order will result in no further expense reimbursements or
other funds from Triad. Neith! er Triad Guaranty Insurance nor Triad Guaranty
Assurance is rated by A.M. Best Co.
(By Thomas Harman, associate editor, BestWeek)
Tom Harman
Copyright (C) 2012 by A. M. Best Company, Inc.
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KEYWORD: CHICAGO
