California Insurance Commissioner Chuck Quackenbush Orders Seizure of Superior National Insurance Group.

Business Editors/Insurance Writers

SACRAMENTO, Calif.--(BUSINESS WIRE)--March 3, 2000

"Our top priority of consumer protection is first achieved by ensuring companies operating in California are solvent and financially

able to pay claims"

California Insurance Commissioner Chuck Quackenbush issued a Seizure Order this morning to take control of Superior National Insurance Group, one of California's largest workers' compensation insurers.

The Superior Group is comprised of five companies with assets of $730 million and a 1999 premium income of $240 million. Four of the companies have been seized by California regulators, including California Compensation Insurance Company, Combined Benefits Insurance Company, Superior National Insurance Company and Superior Pacific Casualty Company. Appropriate actions relating to the fifth company are being pursued in coordination with regulators in the company's domiciliary state of New York.

"The workers' compensation insurance market here in California is fiercely competitive. A by-product of that reality is the possibility of circumstances arising such as these, where a carrier cannot remain competitive and financially solvent at the same time," said Commissioner Quackenbush. "Superior National faced unforeseen loss ratios and an adverse claims history that has resulted in a significant shortfall in reserves. Superior National must be conserved in order to ensure that claims will be paid."

The California Department of Insurance will appear before the Los Angeles and Sacramento Superior Courts on Monday, March 6, 2000, seeking a Conservation Order for Superior National to allow the Commissioner to use Department staff to conduct the business of the conserved company as he sees appropriate. Superior National will be operated under the management of the Department of Insurance's Conservation and

Liquidation Office. All injured workers' claims will be paid in full and on time and there will be no interruption in coverage for any customer. Those with questions about coverages or policies with Superior National may contact the Department of Insurance Consumer Hotline at (800) 927-HELP or in the Los Angeles area codes at [phone].

Financial examinations of Superior National undertaken by the Department revealed that the company was in hazardous financial condition and was severely under reserved. This prompted the Department to take the serious measure of ordering the company's seizure. The last time a major workers' compensation carrier was seized and conserved came with the Golden Eagle Insurance Company takeover in 1997.

The Department of Insurance's Financial Surveillance Branch worked with Superior National over the past several months to determine what actions would be necessary to eliminate the need for conservation. Superior National was exploring several options, ranging from seeking additional investors and reinsurance to the outright sale of the company. With no viable solutions, the Department of Insurance issued the Seizure Order.

Effective in 1995, the California Legislature repealed the State's Minimum-Rate Law and established the open rating system to promote competition in the workers' compensation insurance marketplace. Under open rating, companies are allowed to set their own rates. Companies have been slashing their rates in order to gain marketshare and have, in many instances, kept their rates artificially low -- allowing losses to exceed premiums received.

In 1999, the Workers' Compensation Insurance Rating Bureau (WCIRB) recommended a premium rate adjustment of 18.4% for the entire industry. This recommendation was adopted by the Department of Insurance in the Pure Premium Advisory Rate last year to address increasing industry-wide losses.

The Department of Insurance is working with the State Legislature, business groups, consumer organizations and others to develop new reforms to provide for a competitive and stable marketplace and insurer solvency.

Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at (800) 927-HELP. Callers from out-of-state or in the local Los Angeles area, please dial [phone]. Telecommunications Devices for the Deaf (TDD), please dial [phone].