Regulators in Canada and the United States have seized control of the Confederation Life Insurance Co., Canada’s fifth-largest insurer, in one of the largest insurance company failures on record.
Confederation Life, based in Toronto, had $19.4 billion in Canadian dollars ($14.05 billion in United States dollars), in assets at the end of 1993. The company, which lost $29 million ($21 million) in 1993, has not released results for 1994.
Confederation Life, which is owned by its policyholders, has operations in Canada, the United States and Britain. It had been in operation for 123 years.
In the United States, Confederation Life operates as Confederation Life Insurance & Annuity Co. of Atlanta. The company does business in Maryland.
The move by regulators began in Toronto on Thursday night and was taken at the request of Confederation Life’s board of directors, who voted late Thursday to turn over control of the company to Canada’s superintendent of financial institutions.
“The information I have received . . . indicates to me that Confederation Life’s assets are not sufficient to give adequate protection to policyholders and creditors of Confederation Life Insurance Company,” Doug Peters, secretary of state for international financial institutions, said in a statement announcing the seizure.
Mr. Peters said that on Monday the Canadian government would seek a court order to liquidate the company’s assets.
Peat Marwick Thorne Inc., a consulting firm, was named as the government’s agent to keep Confederation Life operating until its operations were sold.
Michigan regulators followed yesterday, as David Dyckhouse, the state’s insurance commissioner, filed papers in Ingham County Circuit Court to place Confederation Life’s $8 billion U.S. branch in rehabilitation.
Michigan regulators filed their petition because the state is considered the “port of entry” for Confederation Life’s operations in the United States.
And, in a move that could further tangle the process, Bloomberg Business News reported yesterday that regulators from the Georgia Department of Insurance took control of Confederation’s Atlanta-based U.S. affiliate.
Later in the day Mr. Dyckhouse was named as the rehabilitator by the court, which gives him control of Confederation Life’s assets in the United States.
In a prepared statement, Mr. Dyckhouse said, “We will be proceeding with the view toward making all U.S. policyholders and creditors whole.”
In Maryland last year, the parent company and its U.S. subsidiary collected a combined $48 million in life insurance premiums and annuity considerations, according to the Maryland Insurance Administration.
State officials said yesterday that they had not officially been notified of the takeover of Confederation, and did not yet have information for consumers.
The Maryland Life and Health Guaranty Association generally covers Maryland citizens with claims against insolvent insurers that are licensed in Maryland, according to Associate Insurance Commissioner Ilona Klasons.
Policyholders may call the administration in a few days for information at (410) 333-6300.
