Regulators take over property insurer
A buyer is sought for Hawaiian Insurance & Guaranty Co. Ltd.
Hawaii's fourth-largest homeowners insurance company has been taken over by state insurance regulators, who are working with counterparts in other states to find a buyer for the Hawaii firm and several of its sister insurance companies.
The move by Hawaii Insurance Commissioner J.P. Schmidt will enable the state to oversee a sale of Hawaiian Insurance & Guaranty Co. Ltd., said Ernest Fukeda, president of HIG.
HIG has suffered from a rash of customer defections following financial troubles suffered by its Alabama-based parent company, Vesta Insurance Group, which was beset by hurricane-related losses in the Gulf South. In March, rating agencies downgraded Vesta's bond rating to C+, a rating for extremely risky bonds that is considered too low to meet some mortgage lending requirements.
Although Fukeda said HIG is financially sound, its parent's rating dragged down the local subsidiary, causing concerns among several major mortgage lenders. In May, First Hawaiian Bank, American Savings Bank and Central Pacific Bank instructed HIG-insured mortgage borrowers to meet with their insurance agents to discuss the downgrade. Bank of Hawaii went a step further, telling HIG policyholders to seek another insurer.
Although HIG has "more than adequate funds to continue to pay claims" and recently secured the backing of AA-rated reinsurers, Fukeda said the company has lost about 11 percent of its customers so far this year. The company has about 29,000 policyholders, he said.
Despite the losses, Fukeda said, the company has a solid book of business and is turning a profit.
The question appears to be whether a buyer can be found before HIG suffers more defections, causing its business to deteriorate further. Schmidt said he is working with his counterparts in Alabama, California, Florida and Texas to close a deal with a prospective buyer group interested in acquiring the Vesta affiliates in those states, as well as the Hawaii business. Schmidt declined to identify the prospective buyer group.
"We want to wrap things up in the next few weeks or a month or so," Schmidt said. "It is imperative that we move fairly quickly."
Fukeda said he is optimistic.
"We're hoping that when this passes, the bleeding will stop," he said.