American Transit Insurance Company is insolvent
American Transit Insurance Company, the largest provider of commercial auto insurance in New York state, is technically insolvent.
The carrier recently shared its second quarter results, ending the first six months of the year with a net underwriting loss of $731 million, resulting in a negative surplus of $678 million. As of year-end 2023, ATIC insured approximately 76k vehicles across many classifications, including taxis, traditional livery vehicles, and for-hire vehicles dispatched by Transportation Network Company such as Uber and Lyft. The 52-year-old company insures roughly 64% of New York City’s ~117k commercial taxis, livery cabs, black cars and rideshare vehicles.
In the statement of actuarial opinion for 2023, Ronald Kuehn, an actuary with Huggins Actuarial Services, stated the following: “The company’s $187,000,000 provision for unpaid losses and loss adjustment expenses is approximately $690,682,000 less than the minimum amount I consider necessary to be a reasonable estimate. This is the amount by which I estimate both the net of reinsurance reserves for losses and loss adjustment expenses and gross of reinsurance reserves for losses and loss adjustment expenses are deficient on an undiscounted basis. Using my reserve estimate, the company’s statutory policyholders’ surplus would be -$664,677,885.”
In the management discussion and analysis for 2023, ATIC management highlighted fraudulent claims and the challenges operating in a no-fault insurance state. Below are some snippets from the document.
“The persistent submission of abusive no-fault billing has continued. The abuse of medical services has raised significant concerns regarding the over-utilization of unwarranted services. Billings often include treatment codes for which no assigned relative values exist, resulting in inflated charges and uncertainty regarding the value of these claims. Additionally, countering the pattern of fraud has become costly and challenging due to the burden on defense and time constraints.”
“The most drastic change post-COVID and 2023 was the increase of the American Arbitration Association (“AAA”) arbitration hearings. Forum case adjudications are at an all-time high (the fees alone, totaling $18 million in the past two years), and most of the arbitration awards result in some monetary amount to be paid.
In 2019, before the COVID pandemic, ATIC’s AAA arbitration calendar typically had 100 hearings weekly. However, there are now more than triple the number of cases held on a weekly basis and resulting in significantly higher payments. The AAA forum has escalated to an insurmountable challenge for the company. In 2023, the company had approximately 850 arbitration hearings scheduled weekly. These hearings are assigned to staff attorneys, outside counsel, and representatives. Many AAA arbitrators hold over 50 hearings per week, as opposed to the 20 in-person hearings they had before the pandemic. Many No-Fault AAA arbitrators held between 2,000 and 3,000 hearings in 2023. The AAA forum unilaterally changed the rules and has flooded the system with conciliations and hearings at unprecedented numbers.”
“We have been studying the patterns of fraud involving various providers, and part of the program is to make ‘game-changing’ shifts to reduce this fraud. Various RICO suits on the horizon would cover significant amounts. We have several of them on the horizon, including one where we were billed approximately $70 million, which could end up being a RICO lawsuit for treble damages amounting to $212 million.”
Earlier this year, Uber sued ATIC for what it says is a consistent pattern of failing to honor coverage for ride-share drivers.
