New York based insurer Adirondack Insurance Exchange (AIE) and its affiliate Mountain Valley Indemnity Co. (Mountain Valley) have reported financial trouble. They have advised policyholders to seek replacement coverage immediately.
AIE’s financial strength rating from rating firm Demotech was withdrawn on May 28. The carrier told its agents at the time that:
- It was suffering from a surplus shortage and deteriorating capital.
- Their premium rates had not kept pace with rising loss costs.
Mountain Valley’s Demotech rating was withdrawn on July 18.
On July 11, AIE informed its agents that its financial condition had worsened. They advised agents to begin replacing their AIE policies immediately. Last week, AIE and Mountain Valley policyholders received letters containing the same advice from the carriers.
The letters confused policyholders, according to Big I Connecticut and Big I New York members. The letter from Mountain Valley stated that a reinsurance agreement expired on July 1. Policyholders unfamiliar with the reinsurance concept believed that their insurance lapsed on that date. Members are reporting anxious, tense, and sometimes angry phone calls from clients.
Here is what you can tell your affected clients:
- Their policies are in force unless and until the carriers issue either cancellation or non-renewal notices in accordance with New York Insurance Law Section 3425 or a court orders policies to be cancelled.
- If a court judges these companies to be insolvent, it may order cancellation of all policies. Cancellation will take effect no later than 30 days after the date of the court’s order. As of today, there is no mention on the New York Liquidation Bureau’s website of any legal proceedings involving these carriers.
- The carriers have recommended that their policyholders find replacement coverage. It is in your clients’ best interest to seek out alternative insurance providers now.
- Should the carriers become unable to honor their obligations to pay claims or refund unearned premiums, the New York Property Casualty Insurance Security Fund will pay:
- Up to $1,000,000 for unpaid claims, and
- Unearned premiums.
We will report further developments in this situation as we become aware of them.