February 4, 2002: Last Friday the
Pennsylvania Insurance Commissioner placed PHICO under an order of
liquidation. A copy of their press release is below. Near
the end of the press release are links to the PHICO and Pennsylvania
Insurance Department web sites.
The Kansas Insurance Department contacts
for the PHICO situation are Sherry Behzadi - 785-296-4692, Charlette Humburg - 785-296-7814 and
Alan Ebert - 785-296-7846. While we have not seen any specific
announcement from the Kansas Insurance Department, it is assumed that
additional information may also be available from the Kansas Insurance
Guaranty Association which is usually serviced by the Western Guaranty Fund
Service company of Denver, Colorado. The Phone number for Western
Guaranty Fund Service is 303-759-5066. If you have a current professional
liability or other insurance policy in effect from PHICO, then you should
immediately contact your agent or company representative to seek additional
assistance. You may also wish to contact our office to make sure that PHICO
has paid to the Fund all surcharge amounts. If you choose to check
with our office regarding this matter, please have available the PHICO
policy period and surcharge amount. You may contact us by telephone
(785-291-3777), by Fax (785-291-3550) or by e-mail (jreimer@ink.org). Go
to original Fund article regarding PHICO.
Pennsylvania Insurance Department takes action to protect policyholders
HARRISBURG (Feb. 1) -- Pennsylvania Insurance Commissioner M. Diane Koken
today announced that the Commonwealth Court has granted her petition to
enter an Order of Liquidation for PHICO Insurance Company of Mechanicsburg,
Cumberland County. The company will be in liquidation effective immediately.
PHICO's primary business was writing medical-malpractice insurance for
health systems, hospitals and physicians. In addition, PHICO wrote workers'
compensation insurance.
"An accurate financial picture of PHICO has shown us that further
attempts
to rehabilitate the company would be futile," Koken said. "We had
no choice
but to liquidate PHICO in order to avoid further risk of loss to PHICO's
policyholders, claimants and creditors.
"Our responsibility now is to take the necessary steps to orderly
liquidate
the company. The court's liquidation order triggers the state guaranty
associations to pay policyholder claims to the maximum levels allowed by
law."
In August 2001, PHICO filed a quarterly statement that reflected a surplus
of only $6.8 million -- a substantial and alarming decrease from its
year-end 2000 surplus of more than $127 million. This diminished level of
surplus placed PHICO Insurance Company at mandatory control level under
Pennsylvania's Risk Based Capital (RBC). As a result, the Insurance
Department assumed control of PHICO to stabilize the company and determine
whether a plan of rehabilitation would be viable.
"As part of the rehabilitation process, we engaged independent
actuarial
consultants to perform a thorough financial analysis focused on the
company's loss and loss adjustment expense reserves," Koken said.
"This
analysis concluded that the company's previous estimates of loss reserves
were substantially understated. In fact, this recent analysis showed that a
reserve deficiency exceeding $250 million existed as of June 30, 2001.
"Insurance companies must establish reserves sufficient to pay claims.
PHICO
Insurance Company did not establish adequate reserves, nor does the company
have the assets available to cover the shortfall. This gap between assets
and liabilities renders the company insolvent."
With headquarters in Mechanicsburg, PHICO Insurance Company was licensed to
write insurance in 50 states, the District of Columbia and Puerto Rico. In
2000, the company's direct written Premiums were in excess of $242 million.
The states with the largest number of policyholders include Pennsylvania,
Texas, Florida, Indiana and New Jersey.
State law requires that all remaining in force PHICO policies be cancelled
in 30 days. Questions from policyholders concerning claims or policy matters
may call toll-free 1-800-382-1378, locally (717) 766-1122 or log on to
www.PHICO.com. A copy of the Order of
Liquidation can be obtained through
the Insurance Department's website via the PA PowerPort at www.state.pa.us
or directly at www.insurance.state.pa.us.
Commissioner Koken's written statement regarding PHICO Insurance Company
also is available on the Insurance Department's website. Individuals without
Internet capability may call (717) 787-3289 to request a copy.
The following is the text from the
August 16, 2001 Pennsylvania Insurance Department press
release:
Commonwealth News Bureau
Room 308, Main Capitol
Harrisburg, Pennsylvania 17120
Contact: Melissa Fox
Rosanne Placey (717) 787-3289
PENNSYLVANIA INSURANCE DEPARTMENT PLACES PHICO
INSURANCE COMPANY UNDER IMMEDIATE REHABILITATION
Department takes action to protect
policyholders
HARRISBURG (Aug. 16) -– Pennsylvania Insurance
Commissioner M. Diane Koken today announced that the
Insurance Department petitioned Commonwealth Court this
morning to approve an Order of Rehabilitation for PHICO
Insurance Company of Mechanicsburg, Cumberland County. The
court promptly granted the petition, and the company now is
in rehabilitation.
The Order of Rehabilitation gives the
Insurance Department statutory control of PHICO Insurance
Company and the ability to thoroughly analyze, evaluate and
oversee the company's finances.
PHICO provides medical malpractice
insurance for hospitals, physician groups and individual
physicians.
"PHICO filed a quarterly statement
late yesterday that reflected a surplus of $6.8 million, a
substantial and alarming decrease from its yearend 2000
surplus of more than $127 million," Commissioner Koken said.
"Given this dramatic drop and the importance of stabilizing
the company's assets, the department acted swiftly to
petition the court for rehabilitation."
The $6.8 million surplus places PHICO
Insurance Company in mandatory control level based on their
Risk Based Capital (RBC) requirements. RBC requirements were
enacted in Pennsylvania as Act 40 of 1997. Risk factors
specific to a company's operations, assets, liabilities,
loss reserves and other business risks are used in the RBC
methodology to determine the adequacy of an insurer's
capital. RBC is a powerful tool in the regulator's
solvency-monitoring process and is used to identify
companies that may be in a weakening capital position.
"Policyholder protection is the top
priority in the determination to request an Order of
Rehabilitation," Commissioner Koken said. "By placing PHICO
in rehabilitation, we are protecting not only the company's
policyholders -- specifically hospitals and physicians --
but also patients and other consumers of medical services.
The Order of Rehabilitation puts numerous policyholder
safeguards in place -- including the conservation of the
remaining assets of the company and the development of a
payment plan that gives priority to policyholders."
With headquarters in Mechanicsburg,
PHICO Insurance Company is licensed to write insurance in
all 50 states, Puerto Rico and the Virgin Islands. In 2000,
the company's direct written premiums were in excess of $242
million. The states with the largest number of policyholders
include Pennsylvania, Texas, Florida, Indiana and New
Jersey.
"Certainly, we understand that
policyholders, claimants, PHICO employees and the business
community will have many questions regarding our actions and
the steps that will follow," Commissioner Koken said. "We
are committed to timely communication with all of the
affected parties as information becomes available -- as we
begin our thorough evaluation of PHICO Insurance
Company."
Questions from policyholders
concerning claims or non-claim matters may call
1-800-382-1378. A copy of the Order of Rehabilitation can be
obtained by logging onto the Insurance Department website
through the PA PowerPort at www.state.pa.us or directly at
www.insurance.state.pa.us. Interested parties without
Internet capability may phone the Communications Office to
request a copy.
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