New York State hopes to sell Bankrupt Insurer – a New Twist
Posted Mar 05 2009 5:30am
If a sale is not made, the state will be 10 more years wrapping up business from the bankrupt insurance carrier. With current economic trends, it sounds like it has become a nightmare in more ways than one. What was amazing was to read that there are 60 plus insolvent insurers they are managing. Midland went bankrupt over healthcare products and asbestos claims.
This is the first attempt at trying to privatize a bankrupted carrier, and will there be a sale? There are payments owed to it by reinsurers, which are companies that guarantee the risks of other insurers. The state has struggled to collect these payments so how would a private entity do any better? The reinsurers sound similar to what might be referred to as potential sources for revenue when the reserves no longer exist.
“On Tuesday, The New York Times described AIG as a family of good insurance companies roped to "a huge casino." It was not an ordinary casino of the velvet-and-mirrors sort. That kind of casino knows the risk on its gaming tables. The math is simple and experience bears it out. In the credit default swap "casino," the math was new and baroque, full of Greek letters and gobbledygook, and almost no one on Wall Street or in Washington, D.C., pretended to understand it. That was part of the reason why no one put a stop to it.
And the math was wrong. It led to disaster.”
It goes beyond just getting the folks with financial experience, you need the folks that understand the architecture, the projected end results with business intelligence software, in other words the smart folks who understand computer code who don’t have greed at the base of their goals, but rather good healthcare and transparency. We also need Audit tables run to keep everyone somewhat honest and track large transactions and make sure the math is correct with the algorithms and formulas created, otherwise the wheels just keep spinning in the world of virtual money. BD
Twenty-three years ago, Midland Insurance Co. failed, sunk by billions worth of claims from policyholders suffering from exposure to asbestos, defective breast implants and HIV-tainted blood products. New York state officials, who have run it ever since, on Wednesday asked investors to take it off their hands.
“It’s time to move on,” says Mark Peters, special deputy superintendent for the New York Liquidation Bureau, which manages more than 60 insolvent insurers on the state’s behalf. “This could be a template for what we do in the future.”
A successful auction of Midland would be a coup, especially since it appears regulators will have their hands full in the coming years dealing with insurers driven into insolvency by the mortgage crisis. Former industry giant American International Group Inc. has been nationalized, and several prominent insurers are asking the federal government for bailout money.
Further complicating matters, about $600 million of Midland’s assets are payments owed to it by reinsurers, which are companies that guarantee the risks of other insurers. The state has struggled to collect these payments and it’s unclear if a private owner would fare any better.