End of the line for Indiana insurers

December proved to be a month of intense activity for the US
state of Indiana’s Department of Insurance’s commissioner Jim
Atterholt, who within two weeks had to cope with two failed
insurers.

In the most significant of the failures Atterholt was appointed
as rehabilitator of the Standard Life Insurance Company of Indiana
(SLII) in a move aimed at protecting the interests of 38,758
annuity policyholders. Of this total, 4,700 reside in Indiana and
the remainder in 47 other states.

“The quality of Standard Life’s investment portfolio, which has
a high concentration of subprime debt, has deteriorated under
current market conditions to the point that it has become necessary
for the Department to protect the annuity holders of the company,”
said Atterholt in a statement.

In the US, rehabilitation is a process by which the commissioner
is appointed by a court to take over operation of an insurance
company from management in order to manage policyholder obligations
and the assets of the company.

According to the Indiana Insurance Department, SLII’s failure
came despite the infusion of $18 million in additional capital by
its parent company, Capital Assurance Corporation (CAC), during
2008.

Privately owned, CAC was formed in 2005 to acquire SLII for
which it paid $80 million. At the time of the acquisition SLII had
total assets under management of about $1.7 billion.

“It is expected that the assets and liabilities of Standard Life
can be managed under court-supervised rehabilitation to meet
current obligations to policyholders,” said Atterholt.

In the second of the insurer failures Atterholt had to deal
with, he was appointed as rehabilitator of Indiana Medical Savings
Insurance Company (MISC), a health insurer with 6,500 members in
Indiana and six other states.

Atterholt announced that “the vast majority” of MISC’s members
would be given the option to transfer to Golden Rule Insurance
Company, a unit of health insurer UnitedHealth Group, on a
guaranteed coverage basis. MISC is anticipated to be placed into
liquidation.

Indiana is home to 194 insurance companies, with an additional
1,772 licensed to operate in the state.