Puerto Rico has placed Real Legacy Assurance Company under rehabilitation, effectively taking over the company, according to Lt. Gov. Osbert Potter.
At a news conference Thursday, Potter said the Puerto Rico Insurance Commissioner was granted a “Rehabilitation Order” for Real Legacy because of the need to reorganize the operations and restructure the financial condition of the company, without closing the company or placing it in liquidation.
“The Puerto Rico Commissioner of Insurance has taken over the operations of the company to protect the interests of policyholders with claims, creditors of the insurer, and the general public,” Potter said.
Real Legacy is domiciled in Puerto Rico and is licensed and regulated in the territory by the Office of the Lieutenant Governor, Division of Banking, Insurance and Financial Regulation. Real Legacy writes dwelling and homeowner policies, commercial and auto coverage.
Lieutenant Governor Potter indicated that as a result of Real Legacy’s rehabilitation order, the division is working very hard with the Puerto Rico Commissioner of Insurance Office to ensure that all outstanding insurance claims are paid. There are 82 pending claims in the U.S. Virgin Islands.
“We are closely monitoring the situation. The Puerto Rico Insurance Code requires that the rehabilitation of an insurer provides fair and equitable treatment in the payment of all claims, subject to a review by the Puerto Rico court in three months to determine if further action is required. Therefore, U.S. Virgin Islanders’ Real Legacy claims will be treated with the same level of priority as those of Puerto Rico residents. Any customer that is holding an outstanding claim can come to the Division of Banking, Insurance and Financial Regulation for assistance,” Potter said.
Potter said this bankruptcy-like action will not impact the U.S. Virgin Islands’ Insurance Guaranty Fund. That fund acts as a kind of government backstop in case private insurance companies fail and fail to pay. The fund is currently funded at $10 million dollars, reduced from $50 million to allow the government to put the rest of its funding into the current year’s budget.
“If Real Legacy is consequently deemed insolvent, then the Insurance Guaranty Fund will be accessed to pay out the outstanding claims. I ask the Virgin Islands Legislature to restore the balance in the fund to $50 million dollars, to protect the interest of the People of the Virgin Islands.”
The Insurance Guaranty Fund was created in 1984 after the Dome Insurance Company went under, leaving V.I. policy holders on the hook for $48 million in unpaid settlements. It is fed by most of the five percent gross premium taxes that insurance companies pay to the V.I. government and usually receives around $16 million per year.
All 50 states, the District of Columbia, and Puerto Rico have similar funds.
It was set at $50 million in 1990, the year after Hurricane Hugo devastated St. Croix.
The territory has cut the fund to less than that amount every year since 2008, when it borrowed $40 million from the fund to partially pay retroactive pay raises for government employees. That year, the government replaced the money with a letter of credit, in effect borrowing it. In the years since then it has routinely cut the cap to $10 million. In February 2012, while the territory was struggling financially from the aftermath of the worldwide financial collapse, the Legislature passed a law reducing the cap until 2015. In 2015, it amended that act, extending it until 2017. A week ago, the Legislature amended it again, extending it to 2019.
This annual ritual has concerned financial institutions and generated critical reports in the international media.
V.I. Banking and Insurance Director Gwendolyn Hall Brady said Real Legacy is now under the management and control of the Commissioner of Insurance in Puerto Rico and still renewing policies. As of Oct. 2, Real Legacy had settled 98 percent of Hurricane Irma claims and 93 percent of Hurricane Maria claims, Brady said.
Policyholders with outstanding claims or concerns can call Real Legacy at 1-800-433-0881, 787-405-0584 or 787-405-0657. Policy holders can also contact the Division of Banking, Insurance and Financial Regulation on St. Thomas in Nisky Center, 2nd Floor at 340-774-7166, or on St. Croix at 1131 King Street, 3rd Floor at 340-773-6459, or visit the Division’s website at ltg.gov.vi.