Is American Transit, Largest NYC Ridehailing Insurance Company, in Trouble?
Actuarial report finds TLC insurance giant American Transit effectively insolvent. American Transit rejects report stating "consistently met all of its obligations for nearly 50 years"
S&P Global reported that an actuarial assessment on American Transit, the largest NYC for-hire transportation (aka TLC) liability insurance company, concluded the company's reserves to cover unpaid losses and loss adjustments falls short by over $400 million. Without getting too technical, the actuarial report essentially concludes the total claims American Transit will likely need to pay out exceeds its projected reserves and therefore the Company is insolvent.
In an email to S&P Global, American Transit vigorously denied the report’s assessment and said the Company does not accept the actuary’s projections because of the “unique nature” of the NYC TLC insurance industry and the impact of “underwriting and claims fraud investigation and defense initiatives”. In addition, an independent audit conducted by PKF O'Connor Davies and filed on May 31 with the National Association of Insurance Commissioners said American Transit rejected the insolvency opinion.
“[American Transit] has consistently met all of its obligations for nearly 50 years and helped to carry the industry through its highs and lows” - American Transit CFO Christopher Ryan
Both the New York State Department of Financial Services & NYC Taxi & Limousine Commission (TLC) did not return S&P Global emails seeking comment.
Based on AutoMarketplace analysis, American Transit has over 50% market share in the over $400 million TLC liability insurance industry. So, any sort of insolvency event would be news that would make waves in the industry. What we also found interesting in the S&P article is commentary from Derek Freihaut, a principal and consulting actuary for Pinnacle Actuarial Resources, who stated such a report is “very uncommon”. Freihaut said he and a colleague looked at more than 2,400 such reports and found that less than 1% of them stated a company's reserves were "not reasonable." Of those 2,400 reviewed reports, only six carried a "deficient" opinion.
The report also mentioned that American Transit was put in rehabilitation in the 1990s, but reached a settlement which allowed the company to remain in business. According to S&P, New York's regulator routinely conducts periodic reviews of carriers domiciled in the state and began an examination of the American Transit in 2019 covering calendar years 2015 through 2019. The examination is still ongoing.
Given the rapid growth of the TLC insurance industry due to Uber / Lyft we could imagine a scenario where total premiums collected were drastically increasing, but the “quality” of those underwritten premiums may have not been great (i.e., inexperienced drivers NYC for-hire transport drivers). As anyone operating in the TLC industry will know, insurance is usually the biggest expense outside of a car payment for most drivers and fleets - typically ranging from $3,500 to $6,500 per year based on a driver’s driving record and experience.
How much do you pay for your TLC insurance? Does the above story surprise you?
Link to S&P Global article
AutoMarketplace NYC Newsletter is written by Dawood Mian, Founder & CEO of AutoMarketplace. He covers the NYC for-hire transportation industry and related news. Search AutoMarketplace for cars, parts, tires, technicians, body shops, reviews, jobs & more. Find great deals at TLCMKT.COM (new site AutoMarketplace.io to be launched soon, sign-up to the newsletter if you are interested to learn more ahead of launch)