Alabama Insurance Commissioner David Parsons today reports the entry of an
Order of Liquidation against Reliance Insurance Company. This action comes in
response to a petition filed by the Pennsylvania Insurance Department.
In explaining this action, Pennsylvania’s Insurance Commissioner, Diane
Koken, stated, "The financial difficulties of Reliance are worse then we knew on
May 29 when we obtained an Order of Rehabilitation. Further attempts to
rehabilitate Reliance would be futile and would substantially increase the risk
of loss to Reliance policyholders, claimants and creditors.
"The ongoing shortfall of cash receipts - especially those of reinsurance -
needed to pay policyholder claims and administrative expenses has been
exacerbated significantly by the terrorist attack on the World Trade Center.
Recent output from the financial model shows that Reliance will be unable to pay
policyholder claims as early as the fourth quarter of 2001."
Commissioner Parsons said this may be the largest insurance insolvency on
record. He reports the Alabama Insurance Guaranty Association is now obligated
to pay covered policyholder claims in excess of $100 and up to $150,000, except
the association will pay the full amount of any covered workers’ compensation
claim. The guaranty association should receive claim files after about 30 days
and will then send written notice to all insureds and claimants. Those with
policyholder and claim questions should look for information on the Alabama
Insurance Department website http://www.aldoi.gov/ and may email questions
to mailto:insdept@insurance.state.al.us
The Alabama Insurance Guaranty Association can be reached by mail at 502
Montgomery Hwy, Suite 102, Birmingham, AL, 35216 or by phone at
(205)823-4042.
A Pennsylvania-domiciled company, Reliance Insurance Company was licensed in
all 50 states but had stopped writing most new and renewal business in June
2000. The states with the largest number of policyholders include California,
New York, Florida, Pennsylvania, Illinois and Texas. Reliance Insurance
Company's insurance business consisted primarily of workers’ compensation,
commercial auto, commercial liability and personal auto coverage. This Order of
Liquidation applies to all the former subsidiaries that were merged into
Reliance Insurance Company, including Reliance National Indemnity Company,
Reliance National Insurance Company, United Pacific Insurance Company, Reliance
Direct Company, Reliance Surety Company, Reliance Universal Insurance Company,
United Pacific Insurance Company of New York, and Reliance Insurance Company of
Illinois.