(Bloomberg) -- Marblegate Asset Management is in discussions with state regulators about how it can potentially take over the assets of New York City’s insolvent taxi insurer, according to people with knowledge of the matter.
The $3 billion investment firm — the city’s biggest medallion owner and lender — hasn’t made a formal proposal, and is one of multiple parties that have reached out to New York’s Department of Financial Services about the situation at American Transit Insurance Co., according to the people.
The city’s biggest insurer for taxi and rideshare drivers has been insolvent for decades, and a state audit released last month found ATIC’s reserves to be “massively deficient” in its ability to cover claims. In the second quarter, the firm posted net losses of $700 million.
The size of the hole crosses a legal threshold that allows the DFS, which regulates insurers, to step in and place the company into receivership or liquidate it.
The DFS had ordered ATIC to find capital and explore a sale, warning that the consequences of its failure could be devastating and leave tens of thousands of drivers uninsured and without a source of income.
Marblegate has discussed a potential purchase of ATIC’s insolvent portfolio of insurance policies, said the people familiar with the matter, asking not to be identified because the talks are confidential.
Inshur, a digital insurance startup, has also been eyeing ATIC’s assets, such as claims and renewal data, according to a person familiar with the matter.
“The Department remains prepared to engage on any applications or filings fit for regulatory review,” the DFS said in a statement. A spokesman for Marblegate declined to comment, as did a representative for ATIC.
Marblegate, which specializes in distressed and special situations, got into the taxi business by buying thousands of medallions — city-issued licenses to operate cabs — and associated loans whose value was crushed by the entry of Uber Technologies Inc. and Lyft Inc. into the market.
The Greenwich, Connecticut—based firm was later cheered by city leaders after it stepped in to work with drivers to restructure their debt, forgiving about $400 million along the way. The firm also runs a loan servicing business and last year opened a taxi clubhouse for drivers.
Neither Marblegate nor the startup Inshur are interested in buying ATIC itself, which — in addition to its financial condition — is being scrutinized for its management, oversight and spending.
In its audit, the DFS said ATIC failed to have “a written strategic plan, business plan, or capital management process” as well as a risk policy that had been adopted by its board of directors. It also cited instances in which cash was paid out for unspecified services to the benefit of affiliates and management. ATIC has said its issues stem from insurance fraud and escalating costs.
Dan Bratshpis, co-founder of Inshur, said he has been trying to engage with DFS about solutions for ATIC and the broader industry, but has yet to see any “decisive action” from the regulator.
His proposals include introducing financial standards in the livery market, mandating rate adequacy and introducing a public subsidy to eligible carriers to lure new players into the market.
“The DFS has been over-analyzing and in a state of analysis paralysis for a very long time,” he said. “There hasn’t been any transparency and there hasn’t been any clarity. The DFS needs to give the industry notice and runway so that everyone could plan for the capacity needs of the city.”
ATIC has been taking some steps to remedy its financial situation. The company — which offers lower premiums than other insurers — in recent weeks told some renewing policy holders that their premiums will increase by more than 10%, according to drivers who received notices and policy documents.
“ATIC applied for, and DFS approved, an increase to its insurance rates earlier this year,” the DFS said in a statement. “The company has indicated that it is likely to file for approval of additional necessary rate increases in the future.”
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