Judge Rules CA Insurer Insolvent Because Of Camp Fire; $64M In Paradise Liabilities, $23M In Assets

[TexasTowelie]

3. The fact that they had the reinsurance contracts and transferred some of the risks

means that the company the capacity to underwrite more policies. It really depends on the terms of their reinsurance treaties as to whether they properly transferred that risk. Some treaties transfer a set percentage of all risks such as the 90% figure that you quoted, while other treaties may transfer 100% of the risk above a set dollar amount to reinsurance (meaning that a lot of relatively small claims like $25K and $30K vehicles could cripple a company). Other reinsurance treaties may transfer business based upon the lines of business (auto, general liability, homeowners, workers comp, etc.)

The good news is that most policyholders should recover most of their losses from the state guaranty fund, although there will be delays in processing claims. The most exposed are those that own more expensive properties if their loss exceeds the amount that the guaranty fund pays.

The bad news is that the sales and marketing staff will be terminated almost immediately. Most of the underwriting, actuarial, and HR staff will follow in the next few months. The executive staff, statistical, accounts payable, claims, in-house counsel and IT personnel will be around for a longer period of time and will likely be offered bonuses to remain with the company and assist in the liquidation of the company.