Pawtucket Mutual and Narragansett Bay are canceling policies midterm and laying off more than half of their workers as a state regulator continues to seek a buyer.

01:00 AM EDT on Thursday, July 8, 2004

BY DAVID McPHERSON
Journal Staff Writer

Unable to find a buyer after more than a year of state control, regulators are winding down operations of the failed Pawtucket Mutual Insurance Co. and its subsidiary, Narragansett Bay Insurance Co.

Department of Business Regulation Director Marilyn Shannon McConaghy, who took control of Pawtucket Mutual in May 2003, said yesterday that the insurers have begun to notify 7,500 remaining customers that their home and auto policies will be canceled midterm.

Also, 36 of the company's 69 remaining employees were laid off yesterday, McConaghy said in a written statement.

In the news release, McConaghy said she "remains hopeful that there will be a sale of the companies and continues in discussions about a possible sale with interested parties."

She held out hope for a sale even though come Oct. 1 Pawtucket Mutual and Narragansett Bay will have no remaining customers once all the policy cancellations take effect.

She pointed to licenses to operate in 11 states for Pawtucket Mutual and 4 states for Narragansett Bay, the companies' location, Rhode Island's business and regulatory environment and a court order allowing any buyer to convert the insurers to a stock company.

She said these factors "offer an excellent platform for a new entity desiring to do business in the New England market."

The cancellation of the existing auto and home policies were necessary because the cost of obtaining and continuing reinsurance coverage for Pawtucket Mutual and the subsidiary were prohibitive, McConaghy said.

She took control of Pawtucket Mutual in May 2003 after it suffered losses for five consecutive years. McConaghy was appointed rehabilitator by a Superior Court judge.

After the state takeover, Pawtucket Mutual stopped writing new policies and renewed existing policies only in Rhode Island and, in some cases, New York.

For months, McConaghy has said she was hopeful a buyer could be found, but one has yet to materialize.

Contact David McPherson at dmcpherson [at] projo.com.