Regulators in Pennsylvania have put a midsize long-term care insurance (LTCI) issuer, Senior Health Insurance Company of Pennsylvania (SHIP), in rehabilitation.
Judge Mary Hannah Leavitt, a judge at the Commonwealth Court of Pennsylvania, approved a rehabilitation order last week.
The judge appointed Jessica Altman, the Pennsylvania insurance commissioner, to be the rehabilitator.
- Links to SHIP’s official rehabilitation guidance documents are available here.
- A tool you can use to see the latest SHIP rehabilitation case filings is available here. (Enter 1 SHP 2020 in the Docket Number box.)
- A tool you can use to see SHIP’s statutory filings for 2018 is available here. (Enter Senior Health Insurance Company in the Company Name box.)
- An article about Conseco’s effort to create SHIP is available here.
- An article about the creation of the trust that owns SHIP is available here.
The commissioner appointed Patrick Cantilo, who has been the special deputy rehabilitator in charge of managing the Penn Treaty Network American Insurance Company insolvency, to be the special deputy rehabilitator in charge of the SHIP rehabilitation.
Penn Treaty and a sister company, American Network Insurance Company, helped create the modern U.S. long-term care insurance market.
The trustees of the Senior Health Care Oversight Trust, the entity that owns SHIP, and SHIP’s own board have approved the action to put SHIP in rehabilitation, Altman said in a comment accompanying the rehabilitation order announcement
“This action was necessary to protect the interests of SHIP’s policyholders and creditors,” Altman said.
The Pennsylvania judge has asked Altman to file a rehabilitation plan for SHIP by April 22.
Rehabilitation is a process that gives state insurance regulators a chance to save a troubled insurance company. Some insurance companies survive rehabilitation and go on to operate as ordinary insurers. Others enter a liquidation process and go out of business.
The SHIP rehabilitation could be somewhat smaller than the Penn Treaty rehabilitation process. Penn Treaty and American Network entered rehabilitation, in 2009, with about 126,000 policyholders and about $3 billion in total liabilities.
SHIP ended 2018 with about 54,000 LTCI insureds and about $2.7 billion in liabilities.
Conseco Inc. — the Carmel, Indiana-based company now known as CNO Financial Group Inc. — entered the LTCI market back when interest rates were much higher and knowledge about how aging Americans would use long-term care services was sparse.
The company agreed to take on other issuers’ LTCI risk through reinsurance arrangements.
By 2008, however, company managers were saying that the unit had added volatility to Conseco’s earnings, and that the company had contributed $915 million to the unit to shore up its capital levels.
Conseco managers worked to limit losses in 2008, by transferring control of what was the Conseco Senior Health Insurance Company subsidiary to the Senior Health Care Oversight Trust.
When the trust took control of SHIP, SHIP had 142,000 LTCI insureds and $2.9 billion in assets, including $121 million in Conseco Senior Health adjusted capital and $175 million in extra capital from Conseco.
The list of original trust board members included former U.S. Surgeon General C. Everett Koop; Julianne Bowler, a former Massachusetts insurance commissioner; and Gregory Serio, a former New York state insurance superintendent.
Trust and SHIP managers said the new company would be operated solely for the benefit of the LTCI policyholders and without a profit, to ensure that any benefits from rate increases or policy changes would go to the policyholders.