$500 million settlement reached with associates of failed Henrico reinsurer

State insurance regulators have negotiated a $500 million-plus settlement with associates of a failed Henrico County reinsurer, according to legal filings at the State Corporation Commission.

The filings, released this week, seek to keep the terms of the settlement confidential.

The money would go to settle claims that the failed insurer, Reciprocal of America, was unable to honor before regulators placed it into receivership in January 2003.

Reciprocal of America wrote hospital liability insurance, workers' compensation insurance and some ancillary insurance for customers such as nursing homes.

The SCC ordered the company liquidated in 2003 to raise funds to pay some of its claims. Several state guaranty associations, including Virginia's, covered others.

The new settlement, if approved by the commission, could reimburse the guaranty associations.

The deal also could affect the ability of some Reciprocal of America customers to pursue their own claims against the firms with which the state wants to settle, Greg Mitchell, a lawyer for seven Kentucky hospital customers, said in a filing with the commission.

The new settlement involves General Reinsurance Corp., actuarial firm Milliman Inc. and accounting giant Pricewaterhouse Coopers, all of which were sued by customers of Reciprocal of America concerning their financial dealings with the failed insurer.

The settlement also involves Wachovia Bank and five health-care firms and consultants.

The state Bureau of Insurance said the settlement could generate more than $500 million for the financial remains of Reciprocal through a combination of new assets available to the insurer's receiver and reductions in liabilities that the Reciprocal owed.

The bureau said the exact amount depends on what the still-to-be-determined final bill on some pending claims will be.

Contact David Ress at (804) 649-6051 or .