News: 2011 Press Release
For Release: June 8, 2011
Media Calls Only: 916-492-3566
Insurance Commissioner Jones Wins Approval Of Majestic Insurance Rehabilitation Plan
Plan fully protects policyholders and injured workers
Insurance Commissioner Dave Jones announced today that the San Francisco Superior Court has approved a rehabilitation plan for troubled workers' compensation insurer Majestic Insurance Company that will fully protect policyholders by ensuring continuing and timely payment of all workers' compensation claims under Majestic's policies. The Plan is scheduled to close on June 30, 2011, less than 3 months after the Commissioner's conservation of Majestic.
"We're pleased the plan was approved with no changes, and look forward to its implementation and the resolution of this matter," Commissioner Jones said. "The rehabilitation effort for Majestic - which took less than 60-days from when we started negotiating and drafting documents to obtaining court approval on June 2 - is coming to a close and this is a positive step for the insurer's policyholders and injured workers."
Majestic Insurance Company is a mono-line workers' compensation insurance company domiciled in California and admitted to write workers' comp insurance in 17 states. As of the end of 2010, Majestic had total assets of just under $300 million, nearly 1,000 employer policyholders, and was administering and paying benefits on almost 4,000 injured worker claims. Majestic has a strong insurance broker network, and a seasoned staff of underwriters and claims professionals.
Majestic was acquired in 2008 by CRM Holdings in New York, a company that provided administrative services to large workers' compensation self-insurance programs in New York and California. In 2009, many of these self-insurance trusts administered by CRM became insolvent and were shut down by regulators. Majestic's financial challenges began later in 2009 when the regulators sued CRM and all of its affiliated companies, including Majestic, seeking damages of nearly $500 million. Majestic was downgraded by the rating agencies in late 2009, and its business continued to deteriorate through 2010 to the point where conservation by the Commissioner became necessary to protect the interests of Majestic's policyholders and the injured workers' who were receiving benefits under Majestic's policies.
Several weeks prior to initiating formal conservation on April 21, the Department of Insurance commenced negotiations with AmTrust North America, Inc., an A-rated multi-state workers' compensation insurance group, to formulate a Rehabilitation Plan for Majestic. In a matter of weeks, the Commissioner's team formulated a Rehabilitation Plan that was filed in Court on the same day the Commissioner placed Majestic into conservation. The Superior Court set a hearing on the Plan for June 2, 2011, in order to permit all policyholders and interested parties to object to, comment on or support the Plan.
Although opposition to the Plan was filed by representatives of the failed self-insurance trusts that had been administered by CRM, the Commissioner's team responded to all of the concerns that had been raised, and ultimately proved to the satisfaction of the Court that implementation of the Rehabilitation Plan was in the best interests of Majestic's policyholders, injured workers, creditors and the shareholder. Superior Court Judge Peter Busch approved the Rehabilitation Plan at the conclusion of a detailed hearing.
The approval order authorizes the Commissioner and AmTrust to consummate immediately the reinsurance transaction and asset transfers that are the foundation of the Rehabilitation Plan. The parties have set a closing date of June 30, 2011 for the transactions, at which point the Plan will become effective.
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