15 Sep Oceanus Insurance is being liquidated, what should physicians learn from this?
South Carolina Department of Insurance has formally executed the liquidation order effective September 21, 2017 after adverse development in the Oceanus Insurance’s claims reserves. Simply put, Oceanus no longer has the assets to meet their claim obligations.
Oceanus, as recently as 2013, was the sixth largest writer of physician malpractice liability in New York but in 2016 their premium volume decreased by over 40%. This decrease coupled with an increase in claim reserves due to adverse loss development reduced their policyholders’ surplus (net assets) to negative $6M and placed the company in extreme financial distress (per the Oceanus June 30, 2017 statutory statement).
What is most unsettling about this is that providers who are currently insured with, or that have purchased “tail” coverage with Oceanus, may be personally responsible for existing or future claims made against them. Providers paid hard earned dollars to a company that may be unable to uphold their responsibility to their insureds.
Frequently Asked Questions about the Oceanus Insurance RRG Liquidation (source: Oceanus Insurance Website):
- What is a liquidation proceeding?
Liquidation is a type of receivership and is similar to bankruptcy. The South Carolina Insurance Code authorizes the Director of the South Carolina Department of Insurance, in his or her capacity as Liquidator, to liquidate the insurance company. The Liquidation Order directs the Liquidator, to (i) take possession of and safeguard the property of the insurer, (ii) conduct the insurer’s business, and (iii) take such steps needed to liquidate (wind-up the affairs of) the business of the insurer under the supervision of the Court and as the Court may direct.
- What happens to my coverage under my Oceanus insurance policy?
All policies in effect at the time of the issuance of the Liquidation Order continue only for the lesser of: 1) 30 days from the date of entry of the Liquidation Order (10/21/17 at 11:59 p.m. EDT) 2) the expiration of the policy coverage 3) the date the coverage has been replaced with equivalent insurance with another insurer or otherwise terminated the policy or 4) the Liquidator has effected a transfer of the policy obligation pursuant to Item (8) of subsection (a) of Section 38-27-400.
- When should I replace my coverage?
- Will I be issued a refund for my premium?
- Is there Guaranty Association Coverage to Pay Claims?
- Will my claims be paid in full by the Liquidator?
No. It is too early to estimate what amount of policyholder claims will be paid. The amount will be pro rata based on all assets liquidated compared to the valuation of all policyholder related claim liabilities.
- What happens if I have, or want to bring, a lawsuit against Oceanus?
No action at law or equity may be brought against Oceanus or the Liquidator, whether in South Carolina or elsewhere, nor shall any such existing actions be maintained or further prosecuted after issuance of the Liquidation Order.
- Whom can I contact if I have a question regarding Oceanus and/or the Liquidation Proceeding?
Email Claimant Services at ClaimantServices@oceanusinsurance.com. You can also call Claimant Services at 305-952-3533. Oceanus home office remains at: Oceanus Insurance Company, a Risk Retention Group in Liquidation 20200 West Dixie Highway, Suite 1208 Aventura, Fl. 33180.
As you can see from the FAQ’s, the insured is placed in an extremely difficult position with little recourse even though they upheld their end of the insuring agreement by paying the premium due. Before purchasing malpractice insurance (or any insurance for that matter), a provider must consider the following criteria and confirm an Insurer’s financial strength and stability:
- A high A.M. Best rating:M. Best is the preeminent rating agency for insurance companies. This rating provides an unbiased view of an insurance company’s operations and standing in the industry. Companies rated A (“Excellent”) are considered by A.M. Best to have “an excellent ability to meet their ongoing insurance obligations”. The majority of hospitals require that physicians be insured by a company with an A.M. Best rating of A- or higher to grant hospital privileges.
- A large policyholder’s surplus: Policyholder’s surplus is equivalent to net assets or equity in the insurance business. Think of it as having equity in your home. When the value in your home exceeds what is owed on your mortgage, you have equity. The larger the surplus the better. Companies with a large surplus are better able to adapt to the ever-changing dynamics of the healthcare environment, withstand challenging business cycles, and develop new products and services without reneging on these services when they run into problems.
- Consistent income generation: The ability to consistently generate income year after year is another good indicator of financial health. If your insurer loses money in multiple years, this detracts from its equity and can affect whether they can meet their liabilities—including your malpractice claims.
- Stable investment philosophy: Your insurance company should have a conservative investment philosophy and should not have risky investments or a history of making bad investments. A company that invests in secure, fixed income securities such as government debt or safe corporate debt should be at the core of any insurance company investment philosophy.
- Longevity: Your insurance company should have a record of withstanding the test of time through many business cycles. A company with more than 30 years in the medical professional liability market has proven its ability to withstand market cycles and routinely pay claims and deliver services to its policyholders.
New York is a challenging malpractice market and the Medical Society of the State of New York has identified other malpractice insurers that are in serious financial jeopardy (with one insurer having a policyholders’ surplus of negative $354M). New York State’s Department of Financial Services has cautioned that circumstances under which certain insurers are currently operating could deteriorate further should Governor Andrew Cuomo sign legislation that would lengthen the statute of limitations for certain types of medical malpractice claims.
The good news is that New York physicians have several options from strong financially rated insurers including: Coverys RRG, Medical Liability Mutual Insurance Company, MedPro RRG, Pro Assurance RRG, and The Doctors Company. If you have any questions about your insurer’s financial strength and ability to meet their future claim obligations to you, please give us a call and we will help you assess the situation.
Phalanx Healthcare Solutions is a New York based medical malpractice insurance consultant specializing in insurance and reinsurance solutions for physicians, physician organizations, and healthcare systems. For more information, visit our web site at www.phalanxllc.com.