December 15, 2011

Barton County judge approves Farm Bureau takeover of insolvent insurance companies

Policyholder claims will be paid under newly approved agreement

Jefferson City, Mo. - A Barton County judge has approved a proposal to allow Missouri Farm Bureau to assume operations of three insolvent insurance companies. Operated by the Barton County Mutual Group, the three small companies became insolvent after paying claims from the May 22 Joplin tornado. The judge has approved a proposal by the Missouri Department of Insurance, which:

  • Allows the three companies to merge into one company managed by Farm Bureau;
  • Allows Farm Bureau to invest approximately $14 million in surplus notes to restore the company's surplus to a positive level, with the notes being backed by the Missouri Property and Casualty Insurance Guaranty Association;
  • Allows the new company the financial capacity to ensure all policyholder claims are paid and policyholder coverage to continue; and
  • Requires the new company to buy an amount of reinsurance deemed adequate by the department to meet future claims obligations.

The three companies had premium sales of $29 million in 2010, but reported claims of $48 million related to the Joplin tornado. The judge ordered the three companies into receivership on Dec. 1, placing them under the management of the Department of Insurance. Once the plan is implemented according to the judge's order, the department's control will be lifted.

"This is a win for all involved," said John M. Huff, director of the Missouri Department of Insurance. "Policyholders' claims will be paid and Missouri taxpayers will not have to foot the bill. I commend Farm Bureau and Guaranty Association for partnering with us in this innovative agreement."

"We are pleased the Department of Insurance and now a Missouri Circuit Judge recognize the financial strength and management expertise of Missouri Farm Bureau to stabilize these three insurance companies and protect their policy holders," said Blake Hurst, president of Missouri Farm Bureau.  "The Joplin tornado was a devastating event that resulted in property losses that were too much for these companies to handle.  We will work to ensure that policyholder claims are paid and all policyholders' coverage is continued."

Missouri Farm Bureau operates the state's seventh largest homeowners insurance company, with premium sales of $39 million in 2010, and the state's ninth largest auto insurer, with premium sales of $60 million.

The three insolvent companies are Barton Mutual Insurance Co., Gateway Mutual Insurance Co. and Cape Mutual Insurance Co., which have about 41,000 policyholders with homeowners and fire policies. They are licensed as extended Missouri mutuals, also known as county mutuals or farm mutuals. In general, county mutuals are small companies serving rural policyholders. There are about 90 of them in Missouri.

Huff says policyholders must continue making premium payments to keep their insurance coverage intact. Payments should continue to be sent to the Barton County Mutual Group's office in Liberal.

Consumers or insurance agents with questions about any of the three companies in receivership should contact the Insurance Consumer Hotline at 800-726-7390 or visit insurance.mo.gov.

About the Missouri Department of Insurance, Financial Institutions & Professional Registration

The Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) is responsible for consumer protection through the regulation of financial industries and professionals. The department's seven divisions work to enforce state regulations both efficiently and effectively while encouraging a competitive environment for industries and professions to ensure consumers have access to quality products.

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