A Utah judge has temporarily paused an emergency order that prohibited Sentinel Security Life Insurance Co. from writing new business across the country.
Judge Donald H. Hansen issued the stay after a South Carolina judge overturned a comparable order last month concerning Atlantic Coast Life Insurance Co. Both insurance companies are owned by Advantage Capital Partners, widely known as A-Cap.
Under Hansen’s directive, the ban on new policy business is suspended until the conclusion of a trial scheduled to begin on May 12. A-Cap’s appeal, which was originally set for March 10, was rescheduled.
“All prohibitions outlined in the Emergency Order, including the prohibition on the Companies’ ability to write new business … are hereby held in abeyance, shall not be enforced while this stay remains in effect and no other directives or orders shall be issued that undermine this Order, until resolution of this case,” Judge Hansen wrote.
Sentinel Security had suspended the writing of new policies while awaiting the outcome of the A-Cap appeal. With the stay in place, Sentinel Security is now permitted to resume operations.
An A-Cap spokesperson provided InsuranceNewsNet with the following statement:
“While there have been sales in both states—with South Carolina operations never having been interrupted—we are planning to launch a targeted roll-out initiative in the near term. We’re grateful for the continued support of our distribution partners who have remained enthusiastic about working with us throughout this process. A-CAP remains committed to full transparency with regulators as we cooperate to address all outstanding matters. A hearing on the Utah Emergency Order is scheduled for May 12, and we anticipate resolution on the valuation matters at that time, if not before. We stand firmly behind our valuations, which have been substantiated by highly regarded, independent valuation experts, and we remain confident in the financial strength of our company.”
Court documents reveal that South Carolina and Utah regulators collaborated, sharing information as they investigated the finances of both A-Cap-owned insurers throughout 2024.
In South Carolina, Michael Wise, the director of the South Carolina Department of Insurance, issued a “confidential order” on April 10, 2024, placing Atlantic Coast and Southern Atlantic Re under “confidential administrative supervision,” according to court records.
On October 21, the insurance companies were informed that South Carolina was “unwilling to continue to permit the insurers to incur new liabilities … when all companies’ RBC are at a mandatory control level and each of the insurers exhibits negative surplus.”
Court documents indicate that South Carolina regulators directed Atlantic Coast to cease writing new business on November 14. Utah formalized its directive on December 2, followed by South Carolina on December 11.
However, the situation changed on February 13 when South Carolina Administrative Law Judge Ralph King Anderson III ruled in favor of A-Cap. Judge Anderson criticized regulators and rejected the South Carolina insurance department’s conclusion that Atlantic Coast was in financial distress.
“The evidence shows that ACL maintains a positive cash flow and has not experienced any difficulty paying amounts owed to either its policyholders or creditors,” he wrote.
In a strongly worded 24-page decision, Judge Anderson criticized the department’s process for moving forward with its directive despite Atlantic Coast’s good-faith efforts, stating that the directive had financially harmed the insurance companies.
“The directive has tarnished Petitioners’ credibility in the market, resulting in a loss of employees, and damaged relations with its brokerage distribution and amongst local funeral homes,” Judge Anderson stated. “Moreover, policyholders have sought recoupment of premiums, resulting in financial loss to the public.”
A spokeswoman said this week that South Carolina regulators have not yet decided how to respond to Judge Anderson’s decision.
