November 24, 2009
Missouri insurance regulators to distribute $75 million to policyholders
Jefferson City, Mo. - More than 300,000 current and former policyholders of General American Life Insurance Co. (GALIC) will soon receive $75 million in distribution payments. In 1999 the Missouri Department of Insurance went to court to put GALIC's parent company, General American Mutual Holding Co., into receivership. The department uses the receivership process to shut down failing insurance companies and pay claims. Although the parent failed, GALIC was sold to another company and remains in good standing as a licensed insurer in Missouri.
This is the fourth distribution to policyholders since the General American Mutual went into receivership. As with all mutual companies, General American Mutual Holding Co. was owned by its policyholders. The payments represent a portion of the policyholders' ownership of the mutual company.
"When an insurer fails, the state doesn't simply shut down the company and close the doors" said John M. Huff, director of the Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP). "There is a rigorous and often complicated process for calculating the debts owed to policyholders and the assets available to pay those debts. With today's announcement, we are making more progress toward fulfilling that obligation."
The Department of Insurance continues to seek to increase the remaining assets of General American Mutual in order to pay outstanding obligations. In May Director Huff, as receiver, filed a $3 billion lawsuit against the law firm of Dewey LeBoeuf in New York City, which represented General American Mutual in the late 1990s.
When an insurer is financially impaired or asks to be dissolved, the director of the Department of Insurance may ask to be appointed receiver by a circuit court judge. The company is then placed into receivership, and the department takes control of the insurer and administers its property and operations for the benefit of policyholders, creditors and owners.
General American Mutual Holding Co. is one of 11 insurance receiverships in Missouri, with the most recent coming in July 2008. All are under the oversight of the Department of Insurance, whose receivership section enforces Sections 375.1150 to 375.1246 of the Missouri statutes.