South Carolina Court Postpones Hearing for Atlantic Coast Life Insurance

News Summary

A South Carolina court has delayed a significant hearing concerning Atlantic Coast Life Insurance, prompting concerns over its financial stability and future operations. The initial hearing date was shifted from Friday to the following Wednesday. Atlantic Coast, already banned from selling new life policies due to poor financial conditions, faces scrutiny alongside its parent firm, Advantage Capital Partners, and associated companies. A judge recently expressed skepticism about regulators’ claims regarding the insurer’s financial health, highlighting discrepancies in the ongoing legal and regulatory battles that may impact its future.

South Carolina – A South Carolina court has postponed a crucial hearing that will determine the future of Atlantic Coast Life Insurance, which is currently under scrutiny for its financial stability. The hearing, originally scheduled for Friday, will now take place on Wednesday as confirmed by a state official.

The South Carolina Department of Insurance had previously issued an order banning Atlantic Coast from writing new life policies beginning December 31, 2024, citing poor financial conditions. This decision is not only impacting Atlantic Coast but also extends to Southern Atlantic Re, another insurance company owned by the same parent firm, Advantage Capital Partners (A-Cap).

The regulatory ban stems from concerns over the financial health of Atlantic Coast, which has been placed under “confidential administrative supervision” since April due to troubling financial indicators. The regulators pointed to a history of financial mismanagement associated with A-Cap and its relationship with 777 Partners, a private equity firm that is facing allegations of significant mismanagement.

In a move reflecting ongoing legal and financial struggles, Chief Administrative Law Judge Ralph King Anderson III issued a stay against the Department of Insurance’s order on December 30. During the proceedings, Judge Anderson expressed skepticism regarding the claims of financial instability made by the regulators. He indicated that there was a lack of sufficient evidence from the Department to definitively prove Atlantic Coast’s financial inadequacies, especially since the insurer is maintaining a capital and surplus amounting to $100.7 million and holds $3.9 billion in liquid assets.

One of the key issues raised during the earlier hearings involved the transfer of obligations from Atlantic Coast to 777 Re, Ltd., a reinsurance company that has reportedly lost its license. The South Carolina Department argued this transfer raised questions about Atlantic Coast’s solvency. However, Judge Anderson concluded that the insolvency of one reinsurer alone could not substantiate claims of Atlantic Coast’s overall financial distress.

A-Cap representatives contended that Atlantic Coast is fulfilling all its financial obligations and has a healthy cash flow from its pre-need insurance business. Despite this, the Department of Insurance had notified the insurers last October about restrictions on incurring new liabilities due to decreases in their risk-based capital ratios, leading to the current legal strife.

Moreover, A-Cap is facing additional challenges in Utah, where a similar ban was placed on Sentinel Security Life Insurance Co. and its associated reinsurance operators, Haymarket Insurance Co. and Jazz Reinsurance Co.. A judge is scheduled to hear A-Cap’s appeal against this order in Utah in March next year.

The financial struggles of A-Cap have been exacerbated by ongoing legal claims surrounding its financial management practices related to 777 Partners. The scrutiny intensified earlier this year when a lawsuit alleged that 777 Partners mishandled substantial collateralized loans. These issues led A-Cap to file a lawsuit to thwart possible downgrades of their financial ratings by credit rating agency AM Best.

As the postponed hearings approach, A-Cap has expressed relief over the judge’s ruling that allows Atlantic Coast to continue focusing on its core mission—providing insurance products to families across the nation. With the legal and regulatory landscape still in flux, the ultimate fate of Atlantic Coast Life Insurance hinges on the outcome of the hearings set for later this week.

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