Markham General cancels policies, cites capital woes

In the wake of industry speculation on the fate of “virtual” insurer Markham General, the company has told its brokers that all existing policies will be cancelled as of 12:01 a.m. on June 15.

In a letter to brokers approved by Financial Services Commission of Ontario (FSCO) Superintendent Philip Howell, and dated April 12, the company says that notices of cancellation will be sent to all policyholders. Cancellation credits will be calculated on a pro-rata basis, the letter states, and refunds issued following the notice to policyholders.

Rumors had been circulating in the industry that such a move might be taken, after Markham General’s financial woes came to light just weeks ago. The company was suffering a capital crunch, having grown 300% last year, and specifically writing big business in Ontario auto where losses have been heavy.

The privately-held company, which was started in 1999, intended to use the Internet to write business more cost-effectively through independent brokers. Just weeks ago, the company admitted that it had fallen below FSCO minimum capital requirements, and instructed brokers to stop writing new business. Brokers, who may have hoped the company would sell its book of business to another insurer, will now be scrambling to place the business elsewhere before policies are cancelled mid-June.

In an interview the same date as the letter sent to brokers, Markham General founder Brian Johnston refused to comment on the situation, except to say that policyholders would be protected. All claims will be paid by the company, the letter to brokers states.