Regulators Take Reins of Cosmopolitan Life, Cauley Among Creditors

by George Waldon  on Monday, Oct. 12, 2009 12:00 am  

Gone is Cosmopolitan's four-member staff, which, as of March, oversaw a block of 78 excess loss coverage policies, 14 of which were scheduled to renew on May 1.

Those 14 policyholders were notified that their ELC coverage would not be renewed, and Pulaski County Circuit Judge Willard Proctor Jr. ordered the remaining policies canceled effective April 30, 2009.

Cosmopolitan Life appeared to be in good shape when reporting its Sept. 30, 2008, financials. But the fourth-quarter numbers showed a formerly well-capitalized firm rapidly moving toward an imperiled position.

The company's loss of $68,000 through the first nine months of 2008 rocketed to $1.1 million at Dec. 31. Capital and surplus plunged from $2.2 million on Sept. 30 to $835,196 at year's end.

Lile blamed some unexpected claims combined with a declining book of business caused by the economy and small employer clients looking to the federal government for another option for employee health coverage.

"They feel like they're one of the first people to be helped by a new government plan, and as a result, new business dropped significantly," Lile said.

Problems at Cosmopolitan Life effectively killed Advance Insurance Group of America, a third-party administrator for self-insured plans, of which Lile was also president.

"We have no business and no employees," Lile said of AIGA. "We're effectively shut down as of July 1."

The Letter

In a March 17 letter to the Arkansas Insurance Department, Cosmopolitan Life's CFO, Tim Richards, laid bare the company's dire predicament:

"There is approximately $1.4 million in claims that have been processed by Advance Insurance Group of America (AIGA), our contracted third-party administrator for claims processing, that have not been funded by the company but which are outstanding liabilities of the company.

"The current liquid asset position of the company is less than $1.4 million.



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