PIERRE, S.D.–The South Dakota Division of Insurance has filed a petition to have ReliaMax Surety Co., an insurer of private student loans, declared insolvent and ordered it adopt a plan of liquidation.
The company provides coverage to numerous financial institutions, including credit unions, that make private student loans. Analysts have told CUToday.info that whatever the losses being reported by ReliaMax, they do not stem from poor performance of student loans at CUs, which continue to show low delinquencies. The action by the South Dakota regulator will not have any effect on the borrowers themselves.
One lender whose portfolio is insured by ReliaMax indicated it has set up additional reserves for any potential losses pending any future recoveries as the liquidation proceeds. It is expected credit union clients of ReliaMax will need to proceed in a similar fashion.
ReliaMax indicated in its notice that, following the conclusion of a hearing to be scheduled for late June or early July 2018, and entry of an Order by the court, the South Dakota Division of Insurance will take control of ReliaMax, and a liquidator will be appointed.
ReliaMax said it will continue its business operations with regard to the company’s purchased student loan portfolios, including the areas of default prevention and acceptance of claim filings. ReliaMax the effect of the move on its outstanding insurance coverage will be clearer sometime after the hearing and after the Division’s liquidation plan is finalized.
One Company’s Statement
Among those that have made a public statement regarding the petition by the South Dakota Division of Insurance is Meta Financial Group, which confirmed it has received a written notification from ReliaMax of the regulator’s move. In the case of Meta Financial, ReliaMax provides insurance coverage for the company’s $189.1 million purchased, floating rate, seasoned student loan portfolio, the company said.
In a statement, Meta Financial Chairman and CEO J. Tyler Haahr said the company ultimately expects to “recover a substantial portion of our unearned premiums,” but also acknowledged the amount remains “unclear.” Determining that will require additional release of information by the South Dakota Division of Insurance.
Credit unions whose portfolios of private student loans is insured by ReliaMax will also need to make decisions as more information becomes available.