S&P Assigns National Warranty Insurance RRG 'R' Rtg
DOW JONES NEWSWIRES
The following is a press release from Standard & Poor's:
NEW YORK (Standard & Poor's) Nov. 6, 2003--Standard & Poor's Ratings Services said today that it assigned its 'R' financial strength rating to National Warranty Insurance Risk Retention Group (National Warranty) reflecting the company's current state of liquidation.
National Warranty began a termination procedure on Aug. 1, 2003, by order of The Honorable Mrs. Justice Levers of the Grand Court of the Cayman Islands, when George Theodore Lanyon Bullmore and Simon Lovell Clayton Whicker, partners of the Cayman Island member of KPMG, were appointed as joint official liquidators of the company.
National Warranty ceased paying claims in June of 2003. The liquidators have said that the company's liabilities might exceed its assets by $100 million.
"National Warranty is the focus of several class action suits by policyholders in the various states it operated in," said Standard & Poor's credit analyst Ovadiah Jacob. "The company's position on these suits is that as a risk retention group it did not issue policies directly to policyholders; instead it insured member issuers or car dealerships that in turn offered their customers extended warranties," Mr. Jacob added. As such the company does not see itself as directly obligated to the policyholders.
National Warranty, a Cayman Islands-based risk retention group had until recently operated out of Lincoln Nebraska where its operations have since closed. Because National Warranty was one of the first companies in the U.S. to be incorporated outside the country under a 1981 federal law, it has escaped regulation by insurance departments in several states.
An insurer rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations.
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