New York and Ohio insurance regulators, who are balking on accepting a settlement agreement between regulators in 47 states and the brokerage houses that sold annuities issued by bankrupt Baldwin-United Corp., said Monday that they have not ruled out joining the agreement by the Sept. 24 deadline.
If either decides not to sign and the deadline is not extended, the agreement "could come undone," said Bruce Foudree, president of the National Assn. of Insurance Commissioners, which played a central role in the negotiations between state insurance regulators, law enforcement agencies, insurers and brokerages.
The settlement aims to repay principal, plus modest interest, to 165,000 investors who typically paid $20,000 for Baldwin-United's single-premium deferred annuities. The return will be financed by a fund amassed from the sale of Baldwin assets, plus contributions from brokerages and insurers.
Under terms of the agreement, brokers can withdraw from the settlement unless 49 states agree to drop further legal action against them.
Georgia Will Sue
(Georgia has refused from the outset to join in the global settlement, having already collected $340,000 from brokers active in that state. The state intends to press its case in Georgia Superior Court to recover brokerage commissions collected for selling Baldwin-United annuities, according to Andrew Ekonomou, assistant attorney general.)
"We're hopeful that New York and Ohio will sign," Foudree said. "We put this together in the hope that all policyholders throughout the country could benefit. While some states might be able--eventually, after months of litigation--to obtain a better result for their policyholders, that's not a certainty by any means.
"That's the risk they run," he said. "We think that's the best solution we could obtain."
Spokesmen for insurance regulators in New York and Ohio said they are still reviewing the agreement. But Wayne Jones, Ohio's deputy insurance director, added that, had Monday been the deadline, the state would not have signed.
Brokerages to Pay
"It's kind of like a guy who has committed a crime and is trying to buy off the judge," Jones said of the settlement. "Well, we're not for sale." (About 11,000 Ohio residents bought single-premium deferred annuities issued by Baldwin-United, a financial-services holding company based in Cincinnati.)
The settlement with 22 brokerage firms, announced last week, calls for them to pay a total of $157 million to annuity purchasers to settle the lawsuits and various complaints filed by state officials. Only $17 million of that sum appears to be in question.
In addition, 50 life insurance companies, led by New York-based Metropolitan Life, have agreed to contribute an additional $50 million to compensate policyholders who bought the annuities from insurance agents.
The sale of Baldwin-United assets is expected to bring another $185 million.
Metropolitan has agreed to manage the funds and will eventually offer to replace the estimated 165,000 Baldwin policies with Metropolitan-backed annuities, said William Poortlviet, senior vice president and chief actuary.
The settlement gives the brokers an option to pull out unless all states--Georgia excepted--agree to drop further legal actions and claims against them, Foudree said. Whether they choose to exercise that option remains to be seen. In addition, several major brokerage houses have yet to sign, but those signatures are not indispensable to the agreement, he said.
"We've climbed a long way, and we're approaching the top of the mountain," he said. "I hope we can stay on course."