South Carolina Commercial Auto Insurer First Keystone Insolvent

The South Carolina Department of Insurance last month declared an insurer that specialized in providing commercial auto insurance to be insolvent and the insurer is now being liquidated.

The First Keystone Risk Retention Group Inc. wrote taxis and other commercial vehicles. Officials said that 80 percent of its business was in Pennsylvania and New Jersey, with 20 percent in Virginia and Maryland. It was also licensed to do business in Delaware, Virginia, North Carolina, Georgia and Massachusetts.

Judge L. Casey Manning of the Fifth Judicial Circuit Court in Richland County signed the liquidation order on Oct. 21.

Special Liquidator Michael FitzGibbons of FitzGibbons and Co. in Scottsdale, Ariz., who was appointed by South Carolina Insurance Commissioner Ray Farmer, said the insurer’s demise came from writing high policy limits. “The whole book of business from 2010 and prior did them in,” said FitzGibbons. “In 2011 the company started writing minimum limits according to the insurance laws per state.”

FitzGibbons said that First Keystone had $7 million in annual premium in 2013, a figure it was on pace to meet this year.

FitzGibbons said the insurer currently has about 800 open claims. The plan is to stop accepting claims in February next year.

All policies have been cancelled.

The Philadelphia Parking Authority reported that out of the 1,600 taxis in the city, 466 had to secure coverage through a new insurer or stop doing business.

The Pennsylvania Public Utility Commission also informed 66 cab companies they had to secure replacement coverage or stop doing businesses.

FitzGibbons said most all of those companies have already found coverage elsewhere. “That book of business is gone, it just evaporated,” said FitzGibbons.

First Keystone, which is based in Philadelphia, was granted a license by South Carolina in September 2003 on the condition it maintain $2.4 million in capital and surplus.

First Keystone’s total capital and surplus is now estimated to be roughly negative $3 million, officials said.

In 2011, First Keystone hired Towers Watson to review its financial status. While First Keystone had reported losses and loss adjustment expenses of $6.7 million, the Towers Watson estimate put that amount at nearly $9 million. That left the insurer with just $195,645 in adjusted capital and surplus, well below the $2.4 million required by South Carolina.

The company’s officers and directors denied wrongdoing and did not fight the liquidation order.