Recently, AM Best has taken out under review the Underlying Fund Credit Ratings of AM Best’s California Capital Insurance company, Eagle West Insurance Co. (OEIC) and its two subsidiaries, Monterey Insurance Co. (MIC) and Nevada Capital Insurance Co. (NCIC). The Underlying Fund Credit Ratings is considered by AM Best as a measure of the underwriting expertise of AM Best’s California Capital Insurance Companies and their underwriting underwriters.
AM Best has determined that Eagle West Insurance Co. (OEIC) and its two subsidiaries, Eagle Western Insurance Co. (EWIC), Inc. (EWIC), and Eagle Western Life Insurance Co. (EWLIC), Inc. (EWLIC), are not in a strong financial position to continue the underwriting activities for which they have established a reputation. As a result, they have been instructed to cease underwriting underwriters on the California Capital Insurance programs until further notice.
Underwriting activities that involve working relationships with underwriters of the California Capital programs include providing referrals to underwriters of the California Capital programs and conducting seminars on the underwriting services of the California Capital programs. During this time, the underwriters of the California Capital programs will be unable to provide referrals to third party companies with the ability to meet the underwriting requirements for the California Capital programs. This may affect the underwriting activities of these underwriters.
The Underlying Fund Credit Ratings of AM Best’s California Capital Insurance companies were downgraded due to concerns that the companies could not provide underwriting service to underwriters of the California Capital plans that had not yet participated in the first or second underwriting programs underwritten by them. In addition, the underwriters of the California Capital plans were not able to demonstrate the ability to meet the underwriting criteria necessary to maintain underwriter status.
AM Best has determined that Eagle West and Eagle Western Insurance Co. (OEIC) are no longer able to demonstrate the ability to provide underwriting service that meets the underwriting criteria needed to maintain underwriter status with the California Capital plans. Eagle Western’s underwriting activities resulted in the underwriting of two underwriting programs in which they did not meet the underwriting criteria and were not able to maintain underwriter status. Both the underwriting programs were not included in the first or second California Capital underwriting programs underwritten by Eagle Western.
Eagle West is currently being investigated by AM Best for its failure to maintain underwriter status, although there is no evidence of any violation of the provisions of the law that apply to insurance companies who fail to maintain underwriter status. AM Best has determined that Eagle Western was unable to demonstrate that it can meet the criteria set forth in the laws governing insurance companies who have not maintained underwriter status.
Eagle Western had underwritten the California Capital program in 2020 with the assistance of its underwriter partners, including A.M. Best, LLC, the financial institution underwriter responsible for underwriting the California Capital plan. Underwriters that participate in these types of transactions are often required to obtain special authorization from AM Best’s underwriter committee. Underwriter status is granted to an underwriter only after it demonstrates its ability to perform underwriting activities and shows that its underwriting activities meet the underwriting criteria.
In addition to Eagle West and Eagle Western, the other California Capital underwriter that has underwritten the state’s Capital program is Nevada Capital Insurance Co. (NCIC). NCIC is not currently facing any investigation by AM Best and has not been underwritten for several years. Although NCIC is not underwriting underwriters for a number of years, it is not underwriter status itself.
Eagle Western and Eagle West underwriters had been involved in California insurance sales activity for many years prior to their problems with the State of California Capital underwriting program. These two companies were involved with the underwriting of several different plans, including the California Insurance Brokers Association (CIA) plans. Eagle West is now being investigated by AM Best for its participation in the underwriting of the two IAHC plans.
The California Capital insurance plans were established to provide quality coverage at affordable rates to all persons involved in business, government, education, or real estate investments. The original California Capital underwriting plan was designed to provide comprehensive coverage to business and individual investors who owned multiple investment properties in California. These plans covered the cost of capital investment as well as an investment, depreciation, and loan payment expenses associated with property ownership. The original California Capital Underwriting plan also provided coverage for property rental and real estate taxes, repairs and expenses and insurance costs.
AM Best believes that Eagle Western and Eagle West are not currently providing adequate coverage to California business owners and other individuals involved in the State’s business community who may have been involved in similar investments prior to the inception of the California Capital plan. The two companies have been involved in the underwriting of many different investments in the past and, because of their underwriting activities, AM Best does not believe that they are able to provide quality coverage to individuals in California underwritten through the California Capital insurance plans.