Great Northwest Insurance to buy HIG
HIG's parent company says it was not notified properly of the liquidation
Great Northwest Insurance Co. of St. Paul, Minn., has agreed to acquire the Hawaiian Insurance & Guaranty Co. Ltd. for an undisclosed amount, state Insurance Commissioner J.P. Schmidt said yesterday.
The deal still must be approved by Hawaii's 1st Circuit Court. While Schmidt said he believes the court will approve the deal, an attorney for Hawaiian Insurance Group's parent company has cried foul, saying his clients were not adequately notified before the state moved to liquidate the insurance company.
Caught in the middle are some 20,000 auto, home and hurricane policyholders. If the court does not approve the sale by Sept. 20, those policies would be canceled. But Schmidt said he is confident that will not happen.
"It's not that I think we have a strong argument for the court to approve it," Schmidt said. "It's that I can't think of any reason why the court would not approve it."
The sale could end months of anxiety for HIG policyholders, who have seen a cascade of bad news from the company and state insurance officials.
State regulators took over HIG in June after its Alabama-based parent company, Vesta Insurance Group, suffered financial problems stemming from hurricane-related losses in the Gulf South. That move came after 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.
The downgrade prompted First Hawaiian Bank, American Savings Bank and Central Pacific Bank to tell HIG-insured mortgage borrowers to meet with their insurance agents to discuss the downgrade. Bank of Hawaii simply told HIG policyholders to find another insurer.
All this caused a raft of customer defections. HIG executives said the local firm had ample money to cover claims. But the company nonetheless was being dragged down by its parent.
Vesta Insurance, meanwhile, has filed a motion to intervene in the insurance company's liquidation. Jim McWhinnie, an attorney for Vesta, said the parent insurer wants to protect the interests of HIG policyholders. However, he said the company's mainland officers and directors were not notified before the court granted the order to liquidate.
"My clients didn't even know about it until well after the order was filed," McWhinnie said.
He said that the Vesta executives might not oppose the sale but they do not have enough information to form an opinion.
"It may be that my clients would agree to it if (the state was) willing to share the information," he said. "We just don't know."
Schmidt said that the company's Hawaii-based board chairman and two other directors were notified about the state's move to liquidate the company; that, he said, was adequate.
As for wanting information about the sale agreement with Great Northwest, Schmidt said that laws governing insurance company liquidations clearly describe the steps that are to be taken. Schmidt said it is not necessary or appropriate to share details of a pending sale with the parent corporation.
"That's a ridiculous request," he said.