In October, Marblegate Asset Management was reported to be in discussions with state regulators regarding the potential takeover of the assets of New York City’s insolvent taxi insurer, the American Transit Insurance Company (ATIC). Marblegate is a $3 billion investment firm that is also the city’s biggest medallion owner and lender.
As of early November, a formal proposal had yet to be made. Marblegate is one of multiple parties that have reached out to New York’s Department of Financial Services (DFS) regarding the “ATIC situation.”
ATIC, the city’s biggest insurer for taxi and app-hail drivers, has been insolvent for decades, according to reports. A state audit released in September found the company’s reserves to be “massively deficient” in its ability to cover claims. In the second quarter, the firm posted net losses of $700 million.
The size of the hole crosses a legal threshold that allows the DFS, which regulates insurers, to step in and place the company into receivership or liquidate it. The DFS ordered ATIC to find capital and explore a sale, warning that the consequences of a failure to do this could be devastating, leaving tens of thousands of drivers uninsured and without a source of income.
Inshur, a digital insurance startup, has also been eyeing ATIC’s assets, such as claims and renewal data, according to an article in Crain’s New York Business.
“The Department remains prepared to engage on any applications or filings fit for regulatory review,” the DFS said in a statement.
Marblegate got into the taxi business by buying thousands of medallions and associated loans whose values had plummeted after Uber and Lyft entered the NYC market. The firm was later cheered by city leaders after it stepped in to work with drivers to restructure their debt, forgiving about $400 million. The firm also runs a loan servicing business and last year opened a taxi clubhouse for drivers.
Neither Marblegate nor Inshur are interested in buying ATIC itself, which – in addition to its financial condition – is being scrutinized for its management, oversight and spending. In its audit, the DFS said ATIC failed to have “a written strategic plan, business plan, or capital management process” as well as a risk policy that had been adopted by its board of directors. It also cited instances of cash being paid out for unspecified services to the benefit of affiliates and management. ATIC has said its issues stem from insurance fraud and escalating costs.
Dan Bratshpis, co-founder of Inshur, said he has been trying to engage with DFS about solutions for ATIC and the broader industry, but has yet to see any “decisive action” from the regulator. His proposals include introducing financial standards in the livery market, mandating rate adequacy and introducing a public subsidy to eligible carriers to lure new players into the market.
“The DFS has been over-analyzing and in a state of analysis paralysis for a very long time,” said Bratshpis. “There hasn’t been any transparency and there hasn’t been any clarity. The DFS needs to give the industry notice and runway so that everyone could plan for the capacity needs of the city.”
ATIC has been taking some steps to remedy its financial situation. The company recently told some renewing policy holders that their premiums will increase by more than 10%, according to drivers who received notices and policy documents.
“ATIC applied for, and DFS approved, an increase to its insurance rates earlier this year,” the DFS said in a statement. “The company has indicated that it is likely to file for approval of additional necessary rate increases in the future.”
Source: Crain’s New York Business
