Is Trouble at Surety First Sealord a Signal of Trouble Among Small Subcontractors?
The A.M. Best Co. sharply lowered to "weak" from "excellent" First Sealord Surety's credit rating, and the surety's apparent financial troubles have created problems for at least one general contractor with a few subs in default.
Big sureties such as Travelers and Liberty Mutual have remained profitable through the economic downturn by sticking to tight underwriting standards. First Sealord, based in Villanova, Pa., serves contractors whose bonded contract value averages $429,000. Surety industry executives predict increasing defaults by small subcontractors in 2012.
Sean Murphy, vice president of construction operations for Coastal Construction Group, Miami, says his company has a few subcontractors in default wherein the subs' surety bond was provided by First Sealord. "They haven't covered yet," Murphy says. "We're hoping they are covered by reinsurance. It's a little bit of a mess right now."
First Sealord officials could not be reached for comment. The company's website contains news of an impending acquisition by Torus National Insurance Co., but A.M. Best wrote that the deal may not close and that First Sealord's financial condition was worsening.
Gordon McLean, A.M. Best senior financial analyst, says that, in the previous 12 months, First Sealord had $15 million to $18 million in net written premium, with single bond limits up to $5 million.
Industry sources believe First Sealord has stopped writing new bonds. However, on First Sealord's website, there is no sign of trouble.
Ironically, the website contains a quotation from Luke: "For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it begin to mock him."
Incredibly awful reporting. Your sources are one contractor, one rating agency rep, and their website? Seriously?
February 7, 2012
Incredibly awful reporting. Your sources are one contractor, one rating agency rep, and their website? Seriously?
Tell us what else you'd like to read about a $15-million-a-year surety apparently tanking, and we'll see if we can get anyone else to give us an interview for the longer story you'd lik...
February 7, 2012
Tell us what else you'd like to read about a $15-million-a-year surety apparently tanking, and we'll see if we can get anyone else to give us an interview for the longer story you'd like to see about this.--Richard Korman
First Sealord is done. They are out of business. I hear the state is in their taking it over. Wait till word gets out about the collateral their senior management essentially stole. ...
February 7, 2012
First Sealord is done. They are out of business. I hear the state is in their taking it over. Wait till word gets out about the collateral their senior management essentially stole. One of those senior management guys already left for another bonding company! Bet the new bonding company got the wool pulled over their eyes by that guy! Con artists.
Some people still cook books and think they can get away with it because they weren't some public giant like enron. That's what these con men did. All four of that senior management h...
February 7, 2012
Some people still cook books and think they can get away with it because they weren't some public giant like enron. That's what these con men did. All four of that senior management had a hand in this and are for the most part despised by the industry. Hopefully the bonding world is rid of them and for the one guy who went to the another bonding company his career should be short lived once word of all this gets out.
This news is not surprising. I bet if you did a little digging you will likely find out that the best rating a year ago probably wasn't accurate. No way they tanked overnight like tha...
February 7, 2012
This news is not surprising. I bet if you did a little digging you will likely find out that the best rating a year ago probably wasn't accurate. No way they tanked overnight like that. Probably snookered am best and a truckload of others over the years. That's why I can't feel bad about Coastal. There are a bunch of people who wouldn't take their paper because of their rep, going back to when they were named Mountbatten. Coastal should have done their homework. And coastal is no angel either. They love to take advantage of small contractors, make them do extra work without giving them change order compensation, and then when they don't, terminate them and ask the bonding company to do something. Feel bad for the all the small people that lose because of this company going under and not the fat cats.
take a look at the pa dept of insurance website and you'll see the liquidation petition
February 8, 2012
take a look at the pa dept of insurance website and you'll see the liquidation petition
Anyone in the indusrty knows what these guys were up to for years. The fact that so many good producers would have nothing to do with them was al you needed to know. Same with their re...
February 8, 2012
Anyone in the indusrty knows what these guys were up to for years. The fact that so many good producers would have nothing to do with them was al you needed to know. Same with their reinsurance...not your standard ,well respected surety reinsurers but most of it placed in Lloyds where the don't know much about teh US surety market. As for teh one guy already gone to another surety, have you seen tha companys reslts since the got into thebusiness four years ago? Over a 50% loss ratio! Hiring a team from FSSC should only hasten their departure from the industry..No super "stars" their.
If we keep hiding the truth to ourselves, we will end up being like First Sealord, another casualty of the phony business we CREATE. Numbers are fine when things are going up and work ...
February 8, 2012
If we keep hiding the truth to ourselves, we will end up being like First Sealord, another casualty of the phony business we CREATE. Numbers are fine when things are going up and work is plentiful, but as we found out with Madoff, when things are going down and the tide is low, the barnacles appear on the side for all to plainly see. By backing subcontractors that keep it close to the line through "churn" not real profit and good management, the cycle is often repeated. Were they complicit in this? Not sure of all the facts, but we can be certain they were "enablers" to poor business practices not unlike the bankers and rating agencies who got us into the disastrous credit mess. Greed and stupidity are a bad combo. Just don't expect First Sealord (what a name!) to get a bailout, too small to matter.
As someone pointed out, Pennsylvania's insurance department put First Sealord into liquidation today.--Richard Korman
February 8, 2012
As someone pointed out, Pennsylvania's insurance department put First Sealord into liquidation today.--Richard Korman
What a bunch of Monday morning quarterbacks. Has anyone posting negative comments here EVER written a check for a forfeiture?
February 8, 2012
What a bunch of Monday morning quarterbacks. Has anyone posting negative comments here EVER written a check for a forfeiture?
I agree with that guy Anonymous. Have any of the posters ever been employed by first sealord?
February 9, 2012
I agree with that guy Anonymous. Have any of the posters ever been employed by first sealord?
monday morning quaterbacking is not the issue. if you only knew what these guys did. this wasnt just being poor businesspeople. this was the kind of enron that can be kept under wraps ...
February 9, 2012
monday morning quaterbacking is not the issue. if you only knew what these guys did. this wasnt just being poor businesspeople. this was the kind of enron that can be kept under wraps for years because the company was private, not public. they ripped people off. thats not hindsight, thats fact.
responding to the question about posters being employed by fssc. its possible or that the posters definitely know someone on the inside. ive heard this stuff in industry gossip but neve...
February 9, 2012
responding to the question about posters being employed by fssc. its possible or that the posters definitely know someone on the inside. ive heard this stuff in industry gossip but never knew for sure if it was true. sounds like it is. people have been saying for some time they play with their financials. the liquidation news seems to validate this since the deterioration came overnight. nothing deteriorates like that. it took time to get there but they just hid it well. in the end people always pay for it
The "mismanagement team" at FSSC have been tryin gto sell the company for years. They hoodwinked someone to put up 75% of the capital when they purchased it back from Zurich, with a pl...
February 9, 2012
The "mismanagement team" at FSSC have been tryin gto sell the company for years. They hoodwinked someone to put up 75% of the capital when they purchased it back from Zurich, with a plan to rebuld it and sell it again. Only this time there were no buyers except for Torus who obviously didn't know anything about the US surety market and FSSC's reputation. They dodged the proverbial bullet by bringing in someone as a consultant to complete the due diligence who not only is respected in the surety indistry but is lawyer by training as well. SHE was able to drill down further because of her background and see what most USreisnurers knew for years...they were not properly reserving their claims. Inadequate claim reserving + poor underwriting + high expense ratio = liquidation. F&D (Zurich) found out too late when they purchased this company and took a bath, thats why they unloaded it back to the originall owners/ management as they realized they were throwing good money after bad. No coincidnece that the person Torus brought in as a consultant who saved them from making a big mis take was a former surety exec at F&D when the purchased Mountbatten back in the 90's. She knew where and how they "buried the bodies"
PA Insurnace announcement
FOR IMMEDIATE RELEASE:
February 08, 2012
Pennsylvania Insurance Department to Liquidate First Sealord Surety
Harrisburg – Commonwealth Court has approved the Pennsylvania Insurance Department’s petition to liquidate First Sealord Surety Insurance, state Insurance Commissioner Michael Consedine announced today. First Sealord, a bond and surety company based in Villanova, had experienced a steep drop in its surplus.
“I petitioned Commonwealth Court for a liquidation order because First Sealord Surety is no longer able to meet its policyholder obligations or pay its debts as they come due,” said Consedine. “The court’s approval of our petition puts numerous policyholder safeguards in place and establishes an orderly payment process.”
First Sealord Surety began its operations in 1991 as a mono-line insurance company underwriting surety bonds. The firm insured construction general contractors and subcontractors against loss. Until recently, when it stopped writing bonds, it offered coverage in 39 states.
“Aggressively working with financially troubled companies is a critical part of our regulatory role,” Consedine added. “In the majority of cases, our work can help put a company back on a stable financial course. In the case of Sealord, the company fell too far, too fast.”
This liquidation order triggers the following process:
The department, as liquidator, takes over, secures the company and marshals all available assets to pay policyholder claims.
On-site liquidator analyzes the company’s most recent financial data to understand the full scope of company’s financial hole.
Policies (bonds) terminate within 30 business days of liquidation order.
Policyholders/bondholders are among the first priority of payments and will receive notice of that payment process shortly.
Creditors are also paid in order of priority and follow a proof of claims process.
The liquidator distributes any surplus funds to the shareholders.
The company is then formally dissolved.
The Insurance Department is now on-site at the company. Sealord bondholders and producers with questions should call 717-787-7823. More information on the liquidation process can be found at www.insurance.pa.gov.
Media contacts: Rosanne Placey or Melissa Fox, 717-787-3289
PA Insurnace announcement
FOR IMMEDIATE RELEASE:
February 08, 2012
Pennsylvania Insurance Department to Liquidate First Sealord Surety
Harrisburg – Commonwealth Court has approved the Pennsylvania Insurance Department’s petition to liquidate First Sealord Surety Insurance, state Insurance Commissioner Michael Consedine announced today. First Sealord, a bond and surety company based in Villanova, had experienced a steep drop in its surplus.
“I petitioned Commonwealth Court for a liquidation order because First Sealord Surety is no longer able to meet its policyholder obligations or pay its debts as they come due,” said Consedine. “The court’s approval of our petition puts numerous policyholder safeguards in place and establishes an orderly payment process.”
First Sealord Surety began its operations in 1991 as a mono-line insurance company underwriting surety bonds. The firm insured construction general contractors and subcontractors against loss. Until recently, when it stopped writing bonds, it offered coverage in 39 states.
“Aggressively working with financially troubled companies is a critical part of our regulatory role,” Consedine added. “In the majority of cases, our work can help put a company back on a stable financial course. In the case of Sealord, the company fell too far, too fast.”
This liquidation order triggers the following process:
The department, as liquidator, takes over, secures the company and marshals all available assets to pay policyholder claims.
On-site liquidator analyzes the company’s most recent financial data to understand the full scope of company’s financial hole.
Policies (bonds) terminate within 30 business days of liquidation order.
Policyholders/bondholders are among the first priority of payments and will receive notice of that payment process shortly.
Creditors are also paid in order of priority and follow a proof of claims process.
The liquidator distributes any surplus funds to the shareholders.
The company is then formally dissolved.
The Insurance Department is now on-site at the company. Sealord bondholders and producers with questions should call 717-787-7823. More information on the liquidation process can be found at www.insurance.pa.gov.
Media contacts: Rosanne Placey or Melissa Fox, 717-787-3289
The said "consultant" blew Arch and Hanover Sureties up as well!!! If one can't do, one teaches, If can't teach one teaches gym or consults!!!!
February 12, 2012
The said "consultant" blew Arch and Hanover Sureties up as well!!! If one can't do, one teaches, If can't teach one teaches gym or consults!!!!
<br/>Regardless of your thoughts on the consultant's past anyone who has learned surety 101 could see what was wrong with FSSC if given the opportunity to examine their underwriting an...
February 21, 2012
Regardless of your thoughts on the consultant's past anyone who has learned surety 101 could see what was wrong with FSSC if given the opportunity to examine their underwriting and reserving practices closely..obviously Torus was clueless when they did their initial due diligence and thank goodness the consultant came in to confirm what the newly hired head of Torus surety figured out after being on board for about 2 weeks....Torus has no clue about the US surety market ..did yopu see who they gave the pen to as an MGA in NJ? I would bet that T.A. shuts that down before it goes in the tank... Not sure I agree on the cause of the blow ups at Arch and Hanover...ARCH inherited a wood pile filled with skunks from the Kemper days ....its always tough to just throw out accounts when know when else will write them..Hanover? that was pressure from above to write more business..plus the consultant , CEO, had no say in the hiring of the CUO ..Now its all in teh hands of a new CEO...lets see how he handles that can of worms
