Pennsylvania Commonwealth Court has approved petitions to liquidate Penn Treaty Network America Insurance Company and American Network Insurance Company, with policyholder claims to be paid through the state guaranty association system, subject to statutory limits and conditions.
“After a long and difficult eight-year legal process, the court’s decision to approve the liquidation recognizes the companies’ financial difficulties are too great to be remedied, and that consumers are best protected by the state guaranty association system,” Pennsylvania State Insurance Commission Teresa Miller said.
Miller said the two companies have approximately 76,000 policyholders nationwide, with 9,000 residing in Pennsylvania. More than 98 percent of Penn Treaty and American Network’s policies are in long-term care insurance.
Vincent J. Ryan, senior advisor to the Delaware Insurance Commissioner, said The Delaware Life and Health Insurance Guaranty Association will be one of the guaranty associations that will be pulled into the liquidation process.
Ryan said the number of Delaware policyholders numbers 89 for Penn Treaty and 10 for American Network.
Over the past several years, long-term care insurance has posed significant challenges to insurers on a national level. The pricing of these policies for many insurance companies has proved to be insufficient as a result of claims greatly exceeding expectations and low investment returns, according to a release from
Claims have exceeded expectations due to incorrect assumptions concerning the number of policyholders who would drop their coverage and the number of policyholders who would utilize their policy benefits, as well as the cost of providing those benefits. The pricing deficiencies and resulting financial losses have resulted in many long-term care insurers seeking large premium rate increases and some leaving the market.
In the case of Penn Treaty and American Network, the Pennsylvania Insurance Department determined that the magnitude of additional premium rate increases needed to remedy the companies’ financial difficulties (exceeding 300 percent on average) would severely harm policyholders and would not be permitted by state regulators, leaving no alternative other than to place the companies into liquidation.
“Policyholder claims will continue to be covered by the state guaranty association system pursuant to law, and policy claims will be paid subject to the applicable state guaranty association coverage limit and conditions. Policyholders should continue to file claims as they have been in the past, and must continue to pay their premiums in order to be eligible for guaranty association coverage,” Commissioner Miller said. “State guaranty associations were created to protect state residents who are policyholders of an insolvent company that has gone out of business. In each state, other insurance companies licensed in that state pay into a guaranty fund, and that money is used to cover claims when a company becomes insolvent and is liquidated.”
