December 02, 2011

Missouri insurance regulators put small insurance group into receivership

Joplin tornado claims led to unique problems for southwest Missouri group

Jefferson City, Mo. - A Barton County judge has placed a group of three small insurance companies into receivership, after claims from the Joplin tornado left the group insolvent. A Barton County judge has named John M. Huff, director of the Missouri Department of Insurance, receiver of the three companies, Barton Mutual Insurance Co., Gateway Mutual Insurance Co. and Cape Mutual Insurance Co. The three companies are managed as the Barton Mutual Group.

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

The three companies are licensed as extended Missouri mutuals, also known as county mutuals or farm mutuals. In general, they are small companies serving rural policyholders. There are about 90 county mutuals in Missouri.

"As a group, these companies had their risk concentrated in a small geographic area, mainly surrounding Joplin," said Huff. "The once-in-a-lifetime event that was the Joplin tornado resulted in insured property losses that were simply too much for these companies to bear."

The companies had about 41,000 policyholders, primarily with homeowners and fire insurance, and premium sales of nearly $29 million in 2010. The companies' 875 claims from the Joplin tornado totaled approximately $48 million.

Huff says there are significant outstanding claims that the companies would be unable to pay, but the department has submitted a plan to the judge for rehabilitating the companies and ensuring that claims are paid. Under the proposal:

  • The three Barton Group companies will merge together into one company and Missouri Farm Bureau Services Inc. will enter into an agreement to manage the future operations;
  • The Missouri Farm Bureau companies will invest approximately $14 million in surplus notes to restore the surplus to a positive level with the notes being backed by the Missouri Property and Casualty Insurance Guaranty Association;
  • The new company will then have the capacity to ensure all policyholder claims are paid and all policyholders' coverage will continue and will obtain an amount of reinsurance deemed adequate by the department to ensure that it can meet future claims obligations; and
  • Once the plan is implemented, the department's control will be lifted.

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