New York regulator orders taxi insurer to weigh sale after losses

New York’s insurance regulator has issued a damning report outlining the seriously flawed financials of New York’s largest taxi and for-hire insurer, as well as dozens of potential financial irregularities and accounting problems, warning that the consequences of failure it could be devastating for tens of thousands of drivers in the city.

The report, which includes years of previously unpublished correspondence and comprehensive state-mandated examinations of American Transit Insurance Co., shows that state regulators under both current Gov. Kathy Hochul and her predecessor, Andrew Cuomo, are aware of at least for half a decade about dire financial circumstances, but has so far failed to take serious steps to force the company to fix its problems.

The company known as ATIC had reserves that are “massively deficient,” according to an April 3 letter from the New York Department of Financial Services that was posted on the DFS website.

DFS letter to American Transit regarding insolvency

ATIC must take “immediate steps” to cure its insolvency and should “explore all possible options to obtain financing,” according to the letter. That includes a potential sale to a counterparty capable of infusing capital, the regulator said.

“If this situation is not resolved, ATIC is exposed to a significant risk of failure,” the letter warns. “This would be economically devastating to New York’s drivers, passengers, health care providers and economy, and would disrupt vital transportation services.” DFS said.

Read more: NYC’s top taxi insurer insolvent, risking transit chaos

“The company is working tirelessly to address a long-standing statutory solvency issue amid rampant fraud and rising costs,” ATIC said in a statement on Thursday. “We are working closely with industry participants for a solution that does not unduly affect the wider market in a negative way. “

Led by Ralph Bisceglia, ATIC has become a key player in New York’s transit ecosystem, building a roughly 60 percent market share of the city’s taxis and ride-sharing vehicles by offering relatively cheaper plans than competitors. Bloomberg reported this week that industry analysts and taxi owners are concerned about the company’s future after it posted a net loss of more than $700 million in the second quarter — a view shared by DFS.

“A collapse of ATIC would leave tens of thousands of quality drivers uninsured and without a source of income,” according to the letter.

Regulators also scrutinized the company’s management, oversight and spending. They recommended that ATIC recover payments made to affiliates and bonuses paid to company officials totaling $22 million, according to a separate letter from DFS dated May 17.

Top photo: Taxi drivers park their cabs in protest outside Gracie Mansion in New York, U.S., Friday, October 16, 2020. Yellow cab drivers in New York are demanding debt forgiveness due to job losses during the COVID-19 pandemic. Photographer: Paul Frangipane/Bloomberg

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