The Providence, R.I.-based company's existing policies will remain in place for now, but no policies will be renewed and no new business will be written.
In addition, the company has entered into an agreement with OneBeacon Insurance Co., Boston, whereby OneBeacon will acquire renewal rights in Providence Washington's small business package policies.
Management has already received approval from the Rhode Island Insurance Department and is expecting to speak with other state regulators over the next few weeks.
The 205-year-old property and casualty insurer had posted a $7 million loss for the first three months of this year. That came after a $35 million net loss in year 2003 and a $7 million net loss in year 2002.
These losses contributed to the policyholders' surplus dropping from $92 million at year-end 2002 to $59 million at year-end 2003, and to $53 million as of the quarter ending March 31, 2004, according to the insurer.
Providence Washington had been rated B+ by A.M. Best but was promptly downgraded to B-. A.M. Best attributed the insurer's decline partly to losses from asbestos claims on businesses insured in the 1960s through 1980s.
As a result of the anticipated downgrade by A.M. Best and continued decline of policyholder surplus, the company's board of directors determined that ceasing new and renewal business and servicing Providence Washington's current portfolio will allow it to meet its present and future obligations. This decision was reached in the absence of new capital being raised or a buyer for the company.
Following this decision, the Providence Washington board named Jeffrey Mack as new chief executive officer.
"Taking this action is in the best interests of the company's policyholders, claimants, reinsurers, creditors and shareholders," said Mack.
The runoff by the insurer will mean the loss of 235 jobs, including 160 in Rhode Island.
Mack said the company will work with the Rhode Island Department of Business Regulation, as well as the other state insurance commissioners, to ensure compliance with all applicable laws and regulations.
"We plan on using our existing staff in order to efficiently execute our plan and settle our various obligations," said Mack. "We are grateful to our employees for their hard work and dedication, as well as to our insureds, agents, the City of Providence and the State of Rhode Island for their unwavering support."
While the staff of Providence Washington will continue servicing its portfolio, the company plans to gradually reduce its workforce of 235 employees in line with a reduced amount of work.
The company has agents in 17 mostly eastern states, writing personal and small commercial lines. In addition to its headquarters in Rhode Island, it has underwriting offices in Delaware, Pennsylvania, Georgia and Ohio and a claims office in New York.
Addressing Providence Washington's insureds, Mack said, "Current insureds of Providence Washington can expect the company to work very closely with our agency community to find alternative markets to write their business once it comes up for renewal. In the meantime, policyholders' existing coverage with Providence Washington will remain in effect and we will meet 100 percent of all valid claims. Personalized and appropriate communication will be made directly through our agents."
PW is the oldest insurance company in New England and third oldest in the country. It has withstood the perils of the Civil War, the Great Depression, the stock market crash of 1929 and various hurricanes, earthquakes and fires. It is credited with appoint