Dear KAIA Member,
As most of you are now aware, MutualAid eXchange (“MAX”) was placed into rehabilitation on Aug. 8, 2023. Furthermore, it was placed into liquidation on Aug. 22, 2023. We want to share some updated information with members, offer guidance in communicating with customers that may be impacted, and relay some E&O risk management considerations.
Members can find the most up-to-date information about MAX including FAQs, a sample notification to policyholders, and how to submit a claim to the Guaranty Association, by visiting https://insurance.kansas.gov/legal-issues/. MAX will not renew any policies effective immediately. If your clients have a policy with MAX, coverage must be placed elsewhere. Here is a sample letter that can be used in communicating with policyholders. Please reach out if ASCK or one of our Industry Partners can help with market alternatives.
Because MAX has been placed in liquidation, the Kansas Insurance Guaranty Association will assume the processing of all covered claims in accordance with policy language and Kansas Statutes. Unearned premiums may also be eligible from the Guaranty Association. You can find more information about it at https://www.ksiga.org/.
Cameron Mutual Insurance Company Rehabilitation
In addition to the issues surrounding MAX, Cameron Mutual Insurance Company was also recently placed into rehabilitation. Cameron Mutual is a Missouri-domiciled carrier that does write insurance in Kansas. While this carrier falls wholly under the jurisdiction of the Missouri Department of Commerce and Insurance, we know many of you may have policies with Cameron. Here is a sample letter that can be used in communicating with policyholders. The FAQs for Cameron can be found here and our friends at MAIA have prepared a release with additional information you can find here.
E&O Risk Management Considerations
A carrier being placed into rehabilitation and/or liquidation can pose an increased E&O risk to your agency. It is extremely important to properly document all conversations you have with your clients (as well as with company personnel) to minimize your E&O exposure. It is key to offer your clients a choice when it comes to handling their policy with a liquidated or rehabbing carrier and this letter clearly provides the choices available to your clients. Some best practices to remember when replacing coverage include determining if any loss exposures have changed, getting signed and updated applications, sharing any changes or reductions in coverage, delivering policies in a timely basis and encouraging policyholders to review their policy upon receipt.
Your Agency’s E&O Coverage
Keep in mind that many agents E&O carriers in the marketplace have insolvency exclusions in their policies. Many of you place your E&O insurance with Swiss Re through the association and we feel it is important to remind you of the insolvency related language included in the policy.
Section V. E. INSOLVENCY. The financial inability to pay, insolvency, receivership, bankruptcy or liquidation of any insurance company, any Individual Practice Association, Health Maintenance Organization, Preferred Provider Organization, Dental Service Plan, Risk Retention Group, Risk Provider Group, self-insured plan or any pool, syndicate, association, or other combination formed for the purpose of providing insurance, or reinsurance, or any healthcare provider or any reinsurer with which the coverage was placed.
However, this exclusion does not apply if, at the time the coverage was placed with any of the above described entities, such entity or entities were rated by AM Best as B or higher, or alternatively, such entities were member insurers of the state guaranty fund or guaranty association in the state or states of domicile of the subject risk, or such entities were guaranteed by a governmental body or bodies and/or operated by a governmental body or bodies, or the coverage was placed with an insurance carrier through a state established residual market insurance program; or the coverage was placed with a County Mutual or Fraternal reinsured by carriers rated by AM Best as B or higher; or the coverage was placed with an insurance carrier admitted in the state or states of domicile of the subject risk and rated A or higher by Demotech.
The Swiss Re insolvency exclusion does not apply if at the time of placement, the carrier had an AM Best rating of B or higher or is a member of the state guaranty fund or guaranty association; or rated A or higher by Demotech at the time of placement. This is something you should be aware of as you move forward with moving customers to a new carrier, particularly if utilizing a surplus lines carrier with a rating below B. If you are not with Swiss Re, we are happy review your current E&O policy and how coverage may be impacted by rehabilitation or carrier insolvencies.
Please feel free to reach out to Dave or Beth if you have any further questions.
