New York’s insurance regulator has released a damning report detailing the dire financial situation of New York’s largest insurer of taxis and rental cars, citing dozens of potential financial irregularities and accounting problems. The regulator warns that a bankruptcy could be devastating for tens of thousands of drivers in the city.

The report, which includes years of previously unpublished correspondence and extensive state-mandated investigations into American Transit Insurance Co., finds that state regulators, led by current Gov. Kathy Hochul and her predecessor Andrew Cuomo, have known about the company’s dire financial circumstances for at least five years but have failed to take serious action to force the company to address its problems.

The company known as ATIC has reserves that are “grossly short,” according to a report. letter from the New York Department of Financial Services, dated April 3, which was posted on the DFS website.

DFS Letter to American Transit Regarding Insolvency

ATIC must take “immediate action” to resolve its insolvency and must “explore all possible options to obtain financing,” the letter said. This includes a potential sale to a counterparty that can inject capital, the regulator said.

“If this situation is not resolved, ATIC is at grave risk of failure,” the letter warned. “This would be economically devastating for drivers, passengers, health care providers, and the New York economy, and would disrupt essential transportation services,” DFS said.

Read more: NYC’s top taxi insurer goes bankrupt, risking chaos on public transit

“The company is working tirelessly to address a long-standing regulatory solvency issue amid widespread fraud and rising costs,” ATIC said in a statement Thursday. “We are working closely with industry participants on a resolution that does not adversely impact the broader market.”

ATIC, run by Ralph Bisceglia, has become a major player in New York’s public transportation ecosystem, building a market share of about 60% of the city’s taxis and ride-sharing services by offering relatively cheaper plans than competitors, Bloomberg reported This week, industry analysts and taxi owners raised concerns about the company’s future after it posted a net loss of more than $700 million in the second quarter — a view shared by DFS.

“A collapse of ATIC would leave tens of thousands of drivers uninsured and without a source of income,” the letter said.

Regulators also scrutinized the company’s management, oversight and spending. They recommended that ATIC claw back payments to affiliates and bonuses to corporate officers totaling $22 million, according to a separate letter from the DFS dated May 17.

Top photo: Taxi drivers park their cabs in protest outside Gracie Mansion in New York, U.S., on Friday, Oct. 16, 2020. Yellow cab drivers in New York City are calling for debt forgiveness due to job losses during the COVID-19 pandemic. Photograph: Paul Frangipane/Bloomberg

Copyright 2024 Bloomberg.

Topics
Carriers Profit Loss New York