Virginia insurance regulators placed troubled medical malpractice insurer Reciprocal of America into receivership on January 29.
After reviewing the company’s finances, the state’s Bureau of Insurance found the insurer “to be in a hazardous financial condition” and ordered it to stop writing new policies or renewing existing ones. Reciprocal of America, based in Glen Allen, Virginia, is a unit of Richmond-based The Reciprocal Group.
The company, which operates primarily in Alabama, Kentucky, Mississippi, Tennessee, and Virginia, in December asked its member physicians and hospitals for help in raising $100 million by January 31. A request earlier in 2002 seeking $60 million raised only $53 million, Reciprocal stated in its December letter to subscribers. In 2001, Reciprocal wrote direct premiums of $121 million.
A.M. Best Co. downgraded the company’s financial strength rating to B- from A- on March 27, 2002, and further downgraded the rating to C- then E–under supervision–upon the state’s takeover.
A major blow for Reciprocal, which faced mounting claims, was the decision by its Bermuda-based reinsurer, First Virginia Reinsurance Ltd., not to honor its reinsurance obligations, according to Virginia regulators. First Virginia’s decision cost the insurer $29 million, Reciprocal’s records show. In a December 26, 2002, letter to its subscribers, Reciprocal called this “our biggest financial issue.”
With the company no longer writing business, current policyholders will need to find another insurer, said a spokesman for the Virginia Corporation Commission. The company referred all questions to state regulators.