In an inconspicuous white-and-blue office building in Freeport, a few miles into Nassau County, is the headquarters of American Transit Insurance Co.

The 52-year-old family-owned company is hardly a household name, but it’s vital to the way New Yorkers get around the city. American Transit, also known as ATIC, insures about 60% of the more than 117,000 commercial taxis, cabs, black cars and ride-sharing vehicles in New York City.

It is also insolvent.

ATIC, run by Ralph Bisceglia, has been the dominant player in New York City’s commercial auto insurance market, the largest in the country, for decades, offering far lower premiums to taxi drivers than other insurers. It posted more than $700 million in net losses in the second quarter, according to a filing with the National Association of Insurance Commissioners.

“To see this kind of loss of this magnitude — there’s very little precedent,” said Tim Zawacki, a senior analyst at S&P Global Market Intelligence who has followed the insurance industry for 25 years. “If this company is unable to stay in business, there’s going to be a significant fallout in terms of who’s going to insure all these drivers.”

ATIC Chief Financial Officer Christopher Ryan and other company representatives did not respond to multiple email and telephone requests for comment. insurance near me

The losses follow years of warnings from industry analysts and disagreements between ATIC and its outside actuary. The company’s reserves have been considered inadequate for decades, Zawacki said, and the problem has come to a head as the company grapples with larger claim amounts, driven by larger settlements and jury and arbitration awards. A potential bankruptcy for ATIC would leave tens of thousands of taxi drivers without insurance, throwing the city’s complex public transportation ecosystem into turmoil, according to taxi industry experts and former regulators.

The insurer’s losses grew so large that they crossed a threshold known as a “mandatory control level event,” according to a Dec. 31 report by Huggins Actuarial Services, a consultant hired by ATIC. The New York Department of Financial Services — which regulates insurers — could now be forced to step in and place the company into receivership or liquidation.

DFS told Bloomberg it “has been working with the company and other stakeholders to address these long-term financial issues and protect drivers, passengers and the stability of the New York livery insurance market.”

‘Too big to fail’

“There’s a perception that they’re too big to fail,” said Andrew Don, chief operating officer of Research Underwriters, a transportation insurance broker. If that were to happen, “there would be a big hole in the ability to get a taxi, Uber, Lyft or limo in New York because all of a sudden all of these vehicles would be without insurance.”

“The only other insurance companies that could pick them up right now would probably struggle with the volume of business,” Don said. In that case, “every taxi driver or limo driver is going to see a significant increase in their insurance premium” as rates are adjusted to reflect true risk, he said. That could upend an industry already buffeted by headwinds, including increased competition and declining medal values.

In response to questions, the city’s Taxi and Limousine Commission said it maintains close contact with the DFS and meets regularly “to provide expertise and emphasize the importance of affordable insurance to the industry.” It referred Bloomberg to the DFS for comment on ATIC.

Although ATIC is required by the state’s DFS to undergo an audit every five years, there are no publicly available audit reports for the company. A 1986 DFS evaluation obtained by Bloomberg listed ATIC as insolvent with $6 million.

“DFS needs to step in and do something,” said Matthew Daus, a partner at law firm Windels Marx and a former chairman and commissioner of New York City’s Taxi and Limousine Commission. The company’s latest financial filing paints a picture so bleak that it’s “creating anxiety in the industry,” said Daus, who founded Windels Marx’s Transportation Practice Group.

ATIC has been underpricing insurance for decades, buying customers from competitors, Daus and other transportation and insurance industry officials told Bloomberg.

“The premiums they were charging were not commensurate with the risk they were taking,” said Don of Research Underwriters.

It raises questions about ATIC’s ability to pay claims. Uber Technologies Inc. sued ATIC in federal court in February, accusing the insurer of “a pattern and practice of failing to adhere to reasonable claims handling practices and failing to reasonably resolve claims,” ​​resulting in 23 lawsuits filed against Uber and its drivers over accidents that resulted in bodily injury. That left the ride-sharing giant on the hook for paying “substantial sums” to defend itself.

Read more: Uber sues insurer for refusing to cover New York City drivers in accidents

ATIC’s lawyers deny the allegations and the lawsuit is ongoing.

In 2021, actuarial consultant Huggins found the company was about $500 million short of the cash it thought it needed to cover unpaid losses and loss-handling expenses. Such determinations, S&P reported at the time, are exceptionally rare.

“If corrective actions are not successfully implemented by the company and further negative developments continue, the company may be placed into receivership or liquidation,” wrote Ronald Kuehn, a consultant at Huggins.

ATIC’s Ryan told S&P he disagreed with Huggins’ view because of the “unique nature” of the New York market.

Zawacki described the latest losses as “pretty staggering in terms of magnitude” and said it will create unique challenges for regulators.

“Any decision they make will have significant consequences for passengers and drivers,” he said.

Photo: Taxis wait to pick up commuters outside Pennsylvania Station in New York.

Copyright 2024 Bloomberg.

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