NYC’s taxi insurer is insolvent, risking transit collapse

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(Bloomberg) –In a modest blue-and-white office building in Freeport, a few miles away in Nassau County, is the headquarters of American Transit Insurance Co.

The 52-year-old, family-owned firm isn’t a household name, but it’s vital to the way New Yorkers get around the city. American Transit, also known as ATIC, operates approximately 60 percent of New York City’s more than 117,000 commercial taxis, black cabs, black cars and ride-sharing vehicles.

It is also insolvent.

Led by Ralph Bisceglia, ATIC has for decades been the dominant player in New York City’s commercial auto insurance market, the nation’s largest, offering cabbies far lower premiums than other insurers. In the second quarter, it posted net losses of more than $700 million, according to a filing with the National Association of Insurance Commissioners.

“To see these kinds of losses of this size — there’s little precedent,” said Tim Zawacki, senior analyst at S&P Global Market Intelligence, who has covered the insurance industry for 25 years. “If this company is unable to continue in business, there will be significant consequences in terms of who will insure all these drivers.”

Christopher Ryan, ATIC’s chief financial officer, and other company representatives did not respond to multiple email and phone requests for comment.

The losses come after years of warnings from industry analysts and disagreements between ATIC and its third-party actuary. The company’s reserves have been considered deficient for decades, Zawacki said, and the problem has come to a head as the company grapples with larger claims driven by larger settlements, as well as jury and arbitration awards . A potential ATIC failure would mean tens of thousands of taxi drivers without insurance, throwing the city’s complex transit ecosystem into turmoil, taxi industry experts and former regulators said.

The insurer’s losses have grown so large that they have crossed a threshold known as a “mandatory control level event,” according to a Dec. 31 report by Huggins Actuarial Services, a consultant hired by ATIC. New York’s Department of Financial Services – which regulates insurers – could now be forced to step in to put the company into receivership or liquidation.

DFS told Bloomberg it “worked with the company and other stakeholders to address these long-standing financial issues and protect drivers, passengers and the stability of New York’s insurance market.”

“Too Big to Fail”

“There’s a perception that they’re too big to fail,” said Andrew Don, chief operating officer of Research Underwriters, a transportation insurance broker. If that were to happen, “there would be a big gap in the ability to get a taxi, an Uber, a Lyft or a limousine in New York because all of these vehicles would suddenly be uninsured.”

“The only other insurance carriers that could take them on right now might struggle with the volume of business,” Don said. In that case, “every taxi driver or limousine driver will see a significant increase in their insurance premium” as rates adjust to reflect actual risk, he said. That could upend an industry already buffeted by headwinds, including increased competition and declining medallion values.

In response to questions, the city’s Taxi and Limousine Commission said it is in close contact with DFS and meets with it regularly “to provide expertise and emphasize the importance of affordable insurance to the industry.” He referred Bloomberg to DFS for comment on ATIC.

While ATIC is required by the state’s DFS to undergo an examination every five years, there are no publicly available examination reports for the company. A 1986 DFS appraisal obtained by Bloomberg described ATIC as $6 million insolvent.

“DFS needs to step in and do something,” said Matthew Daus, a partner at the law firm Windels Marx and former chairman and commissioner of the New York Taxi and Limousine Commission. The company’s latest financial filing paints such a dire picture that it is “creating unease in the industry,” said Daus, who founded Windels Marx’s Transportation Practice Group.

ATIC has undercut the price of insurance for decades, drawing business from competitors, Daus and other transit and insurance industry officials told Bloomberg.

“The premiums they were charging were out of proportion to the risk they were taking,” said Don of Research Underwriters.

This raises questions about ATIC’s ability to pay damages. Uber Technologies Inc. sued ATIC in federal court in February, accusing the insurer of “a pattern and practice of failing to follow reasonable claims handling practices and of failing to reasonably resolve claims,” ​​which has resulted in 23 lawsuits filed against Uber and its drivers. accidents involving bodily injury. This left the ride-share giant paying “substantial sums” to defend itself.

Read more: Uber is suing an insurer for refusing to cover New York drivers in accidents

ATIC’s lawyers have denied the allegations, and the trial is ongoing.

In 2021, actuarial consultant Huggins found that the company had about $500 million less cash than it thought it needed to cover its unpaid losses and loss adjustment expenses. This type of determination, S&P reported at the time, is exceptionally rare.

“If the corrective action is not successfully implemented by the company and the adverse development continues, there is a possibility that the company may be placed into some form of receivership or liquidation,” wrote Ronald Kuehn, a consultant at Huggins.

ATIC’s Ryan told S&P that he disagreed with Huggins’ view because of the “unique nature” of the New York market.

Zawacki described the latest losses as “pretty amazing in terms of scale” and said they would create unique challenges for regulators.

“Any decision they make will have significant implications for passengers and drivers,” he said.