Penn Treaty backs off LTC policies

Penn Treaty American Corp.’s reinsurer has withdrawn its agreement to back long term care policies written by two of Penn Treaty’s subsidiaries before 2002. Penn Treaty Network America Insurance Co. and American Network Insurance Co., subsidiaries of the Allentown, Pa.-based carrier, have provided notifications of breach to Imagine International Reinsurance Ltd. The Hamilton, Bermuda-based reinsurer gave verbal notification to Penn Treaty that it will not provide the additional letter of credit to cover the older policies, according to a statement from Penn Treaty. Imagine also said that it is not in breach, because the insurer failed to get state regulators’ support for a rate increase on the policies, according to Penn Treaty.However, the insurer “vehemently disagrees that state regulatory actions or inactions support this position.” Penn Treaty has also given Imagine five days to fix the problem prior to seeking legal action, which could include arbitration. Currently, the carrier is working with the Pennsylvania Insurance Department to encourage Imagine to honor its agreement. The company also said that policyholders are still protected and will not be affected by the dispute.