Illinois Suspends Medical Professional Liability Insurer

The Illinois Insurance Department suspended Professional Liability Insurance Company of America, citing "hazardous" losses that put policyholders and creditors at risk.

The order bars the St. Louis-based medical professional liability insurer from writing new policies or renewing existing policies in the state, effective Nov. 1, 2009. It is scheduled to remain in effect through Oct. 31, 2011.

According to the order from Insurance Director Michael McRaith, "PLICA is in such financial condition that the further transaction of business in Illinois would be hazardous to policyholders and creditors in this state and to the public."

McRaith's order claims PLICA's held reserves are too inadequate to be in compliance with state regulations. It cited an adverse one-year loss development of $9.3 million, or 41% of 2007 policyholders' surplus and an adverse two-year loss of $7.6 million, or 40% of 2006 policyholders' surplus. Net cash from operations was negative $2.8 million as of Dec. 31, 2008, and negative $2.9 million on June 30, 2009.

Further, in 2008 PLICA had five Insurance Regulatory Information System ratios outside the usual values, including a gross change in policyholders' surplus of negative 29%; usual values are -10% to +50%. According to the order, having five IRIS standards outside the usual values is indication of hazardous financial condition.

In August, Connecticut regulators ordered PLICA to only service existing business. The Illinois order cited this action as another indicator that the company would be limited in generating future revenues.

PLICA representatives referred all questions to President and Chief Executive Officer Howard B. Nathans, who did not immediately return a message seeking comment.

PLICA offers medical professional liability insurance coverage on a claims-made policy basis to physicians, surgeons and entities in five states, according to BestLink. The company began writing business in Illinois in June 2004, and by year-end 2004 was also writing in Missouri and Texas. In 2007, PLICA began writing business in Connecticut. In Texas, the company writes coverage under Medical Liability Insurance Company of America.