NYC’s largest taxi insurer ordered to explore sale after losses

New York’s insurance regulator ordered American Transit Insurance Co. to immediately find capital and explore a sale in a damning report showing its dire financial condition.

The report exposed dozens of potential financial improprieties and accounting problems at the city’s biggest insurer of taxis and for-hire vehicles and warned that the consequences of the company’s failure could be devastating for tens of thousands of drivers.

The insurer 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. ATIC must take “immediate steps” to cure its insolvency and should “explore all possible options to obtain financing,” according to the letter.

“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.

DFS letter to American Transit regarding insolvency

ATIC said in a statement on Thursday that the company was working to address “a long-standing statutory solvency issue amid rampant fraud and rising costs”. The company said it was looking for a solution, which “does not unduly affect the wider market in a negative way”.

The documents showed years of previously unpublished correspondence and comprehensive state-mandated examinations that highlighted ATIC’s dire financial circumstances. The report raises questions about how regulators under current Gov. Kathy Hochul and her predecessor Andrew Cuomo failed to take serious action to force the company to address its problems until recent months.

DFS said in a statement that under the leadership of Hochul and current Superintendent Adrienne Harris, the department is releasing the exam reports “for the first time in nearly 40 years” and said “it took time to unravel the complex issues and history”.

Key player

Led by Ralph Bisceglia, ATIC is a key player in New York’s transit ecosystem, having built 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,” DFS warned.

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

ATIC, which has insured drivers and taxi owners in the New York area for more than 50 years, has long been at odds with third-party actuaries over the amount it reserves for claims while fighting attempts to regulation to consolidate its reserves. for most of its existence.

DFS said regulators made significant efforts to resolve ATIC’s financial problems, including filing several petitions to put the company into liquidation beginning in 1979. The New York State Supreme Court dismissed that petition, a decision that was upheld by the Appellate Division and the State. Court of Appeal in the 1980s, DFS said.

The state Department of Insurance filed another petition trying to put ATIC into receivership in 1987 after an examination report found the company insolvent, but the case was settled after ATIC received a $6.6 million infusion dollars from the parent company.

In 1991, the Department of Insurance tried again to put the company into rehabilitation, prompting ATIC to apply for an injunction to stop the proceedings. Finally, a special arbitrator appointed to arbitrate the case suggested that ATIC seek an infusion of capital. A year later, the company and the state reached a settlement that allowed ATIC to remain in business but stipulated that the company keep the surplus contributions and submit to increased state monitoring, DFS said.

“Dangerous Practice”

More recent valuations have gone beyond the company’s balance sheet. A 2018 review identified problems with how the company was run, raising questions about its management, oversight and spending.

“ATIC did not have a written strategic plan, business plan or capital management process, failed to maintain documentation in support of its enterprise risk management function and did not have a written risk policy adopted by its board of administration”, according to ATIC. review, a summary of the review by DFS and the National Association of Insurance Commissioners over the five-year period from the beginning of 2014 to the end of 2018.

DFS recommended that ATIC recover payments made to affiliates and bonuses paid to company officials totaling $22 million, according to a separate letter from the agency dated May 17.

The company’s problems have grown as it deals with larger claims driven by larger settlements, along with jury and arbitration awards. The company is being sued in federal court by Uber Technologies Inc. for a “consistent pattern of not providing coverage for New York carpool drivers who have accidents.”

ATIC’s lawyers have denied the allegations and the trial is ongoing, but DFS has focused on the risk of inadequate reserves.

“Absent a substantial infusion of capital, the company can only use current premiums to pay those past claims,” ​​according to the April letter to ATIC’s director of compliance and risk, Cisca Hung. “This dangerous practice leaves no assets to pay for the damages incurred by current policyholders.”

DFS said it had not been approached by any “credible acquirers” of the company or its book of business, but said the department was working on a “comprehensive plan to stabilize the insurance market, bring in new players, help drivers and protect everyone”. New Yorkers.”

The department is also “taking steps to prepare for all contingencies, including additional regulatory action if and when appropriate,” he said, in response to questions about whether the agency would seek to liquidate or restructure the insurer.

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Loss of profit for carriers