Oklahoma regulators move to take over company with state contract for uninsured motorists

Aug. 07--The Oklahoma City-based insurer that has the state contract to provide temporary liability coverage for uninsured motorists in Oklahoma is insolvent and its assets should be liquidated, state regulators claim.

The Oklahoma Insurance Department has filed a civil action in Oklahoma County District Court to take control of Red Rock Insurance Co. The company was awarded the state contract in November to provide temporary insurance for uninsured drivers under a new Oklahoma law that allows law enforcement to seize the license plates of motorists without liability coverage until they purchase a policy.

Red Rock President Michael Beasley said the company's management team is committed to trying to save the firm, and will submit a plan to state insurance regulators to recapitalize the insurer. Beasley declined to comment further.

This is the second time in less than two years that Red Rock has drawn the attention of state Insurance Department for allegedly hazardous financial conditions. The company, formerly known as BancInsure Inc., had been struggling for the past several years with losses related to the 2008 financial crisis before it was acquired by the New York-based company Foster Jennings Inc. in February 2013. At the time, the company was under orders from state regulators to strengthen its capital position or be placed into receivership.

Foster Jennings has been unable to inject sufficient capital into the company to address its dangerous financial condition, said Kelly Collins Dexter, a spokeswoman for the Insurance Department.

"We had appointed first a supervisor, then a conservator, but it has become clear that judicial action is needed in order to protect the interests of the company's insureds and creditors," Dexter said.

According to filings with U.S. Securities and Exchange Commission, the Moscow-based special purpose acquisition company CIS Acquisitions LTD, is seeking funds from investors to purchase Red Rock for $36.4 million.

CIS was formed under the laws of the British Virgin Islands by a group of Russian businessmen to invest primarily in companies in Eastern Europe and Russia, according to its website.

Attempts to reach Kyle Shostak, chief financial officer for CIS, were unsuccessful.

Red Rock has become insolvent and it continued operation is a hazard to policy holders, the Oklahoma Insurance Department claims in court documents. A hearing is scheduled for Aug. 21 in Oklahoma County District Court to determine the company's fate.

"As of this date, there has been no infusion of any cash whatsoever in the company," the agency claimed in court documents filed last week in Oklahoma County District Court to seize control of Red Rock and liquidate its assets.

Two independent auditing firms have resigned and declined to issue an annual audit of the company's financial statement that is required by state law, according to the Department of Insurance.

One auditing firm, BDO USA LLP, stepped down as Red Rock's auditor in July "due to to the company's management failing to arrange a competent independent investigation of certain investments," according to court documents filed by the Insurance Department.

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