Wisconsin Commissioner Moves to Put Time Insurance in Rehabilitation
Resources
- The Wisconsin rehabilitation website for Time Insurance is available here.
- An article about Assurant reviving the Time Insurance brand is available here.
The History
Members of the Board of Trade of LaCrosse, Wisconsin, started Time on April 15, 1892, as the LaCrosse Mutual Aid Association. The company started out by providing benefits for workers who were unable to earn a paycheck due to illness or injury. Early ads emphasized that the company paid benefits during the first week a worker was off work and with fewer hassles than at other companies. The company moved its headquarters to Milwaukee around 1896 and changed its name to Time Insurance. A company district manager estimated, in an ad that appeared in 1913, that about one-fifth of Wisconsin men who had accidental and health insurance had accident and health insurance from Time. By around 1940, the company was advertising that it was selling a "hospital plan," or precursor to today's major medical insurance policies, that would pay $10 for anesthetic, up to $5 for laboratory tests, up to $5 for an ambulance ride, and up to $4 per day for 30 days for a hospital room. The Dutch company now known as Fortis acquired Time in 1978, changed its name to Fortis Insurance Company, and used the company as a vehicle for issuing annuities, life insurance and long-term care insurance as well as health insurance and disability insurance. Fortis arranged to have John Hancock reinsure the Time long-term care insurance policies in 2000, and it arranged to have a unit of Hartford Financial Services Group Inc. reinsurance the life, disability and annuities in 2001. Units of Prudential and Talcott Resolution are now administering those policies, according to Haven. Assurant Inc. acquired what was left of Time in 2004 and revived the Time brand in 2005. Time had trouble modernizing its operations to meet the expectations of consumers who were used to doing business with large managed care companies. State insurance regulators imposed several fines on the company in connection with concerns about claim payments and other matters. Assurant put Time's operations in runoff in 2015 and sold what was left of the company to Haven Holdings Inc. of San Juan, Puerto, Rico, in December 2018. Haven Holdings controls Time through the Haven Time IHC intermediate-level holding company. Haven has an asset management affiliate with offices in Greenwich, Connecticut.
The Company Today
Time reported $5.6 million in net income for the first three quarters of 2019 on $18 million in revenue, including $17 million in commissions and expense allowances on reinsurance ceded, according to a financial statement posted by the California Department of Insurance. It ended the third quarter with about $18 million in assets and $14 million in liabilities. Haven moved the company's official jurisdiction of domicile from Wisconsin to Puerto Rico in 2018.
Afable's Petition
When Time applied to move to Puerto Rico, Wisconsin regulators noted that, after moving to Puerto Rico, without any other action, the company would have a risk-based capital ratio, or rough financial indicator of financial health, of just 33%, and that the company might have to go into rehabilitation or liquidation, according to Afable's petition for rehabilitation. Haven then told Wisconsin regulators that the vast majority of Time's business was 100% reinsured and that the company would only need enough capital to support about 150 directly insured policies, according to Afable. After Wisconsin approved the redomestication, Time tried recapture the fully reinsured life insurance and long-term care insurance (LTCI) policies, according to Afable. In July 2019, Time officially applied to recapture the LTCI policies reinsured by John Hancock, according to Afable. Wisconsin regulators moved to block the transaction, and, in December 2019, they told regulators in all states that Time would end up with too little capital to support the recaptured business, according to Afable. Time "presented an insurer insolvency expert who opined that without the transaction, Time would likely need to be placed into liquidation," according to Afable. Wisconsin regulators then issued a cease-and-desist order declaring that letting the parties transfer LTCI policy risk from a solvent reinsurer to a financially distressed international insurer would not be in the best interest of Wisconsin insureds or the public. One concern was that "the proposed movement of a material amount of capital support for the long-term care policies to an intermediate holding company where it could be used for other purposes after three years," according to Afable. Another concern was "the viability of the transaction being predicated on a rate of return on investment that is unlikely to occur without significant investment risk," according to Afable. Time agreed to redomesticate to Wisconsin, and it completed that process May 6, according to Afable.
A Proposed Reinsurance Arrangement
Afable says that Time already has a risk-based capital ratio low enough to put it at the mandatory control level. Afable has issued an order requiring Time to continue to service existing business, and to make routine payments to employers, professionals, reinsurers and claimants, but to stop engaging in any transactions that require submission of form filings, and to refrain from making nonroutine payments without Afable's permission. Afable proposed letting Time continue ordinary operations if it could get its risk-based capital ratio up to 450%. The solution Haven and Time proposed involved moving an existing reinsurance arrangement to Haven Reinsurance. "Under the initial plan, Time's long-term care reinsurer no longer would be obligated to bear any risk and the viability of the transaction would be dependent on the capital surplus of Time and Haven Reinsurance," according to Afable. The Wisconsin Office of the Commissioner of Insurance "has determined that, under the proposed transaction, here would be insufficient surplus available to support reserves, such that small adverse development in the long-term care reserves would lead to Time's insolvency," according to Afable. Several states other than Wisconsin told Wisconsin they would be unlikely to rescind the ease-and-desist orders they had imposed on Time, and getting approval for the deal from a majority of the states was a requirement for the transaction to happen, according to Afable. Because Time was not going to get the state approvals necessary to make the Haven Reinsurance deal happen, Wisconsin regulators believe that rehabilitation is the only remaining option, according to Afable. — Read Assurant Puts Health, Benefits Units Up for Sale, on ThinkAdvisor. — Connect with ThinkAdvisor Life/Health on Facebook, LinkedIn and Twitter.
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