Although they have been prohibited from selling new policie in Maryland, Executive Life Insurance of Inglewood, Calif., and its sister company in New York will continue to serve those holding their existing policies here.
State Insurance Commissioner John A. Donaho has ordered the two companies, both subsidiaries of First Executive Corp. of Los Angeles, to stop selling or renewing policies in Maryland. The New York operation is called Executive Life of New York.
At the end of last year, Executive Life of California had $731 million in life policies in Maryland and Executive Life of New York had $88 million. The companies account for less than one half of one percent of Maryland's life insurance policies. The total value of those policies is about $200 billion, according to the Insurance Division.
At the end of 1990, Executive Life of California had 2,625 policies in Maryland, including annuities and guaranteed income contracts.
The parent company of the two firms was Michael Milken's top "junk bond" customer and suffered huge losses when the junk bond market plunged.
The cease-and-desist order and the suspension of the firms' certificates of authority were issued Tuesday and became effective the same day. However, the company must continue to serve current policies as the premiums are paid.
Executive Life of California was put under conservatorship by the California insurance commissioner on April 11. Its sister operation in New York was seized by New York regulators on April 16.
During 1990 the California company paid $12.8 million in claims and collected $7.1 million in life insurance premiums in Maryland, Donaho said.
Policy-holders are covered by the Life & Health Insurance Guaranty Corp., the Maryland fund that backs the policies of life and health insurance companies. The fund also covers fixed-rate annuities but not variable-rate annuities, Donaho said. Annuities are a form of contract sold by a life insurance company that guarantee a fixed or variable payment to a person at a future date.
Donaho said Maryland initially postponed ordering First Executive to stop selling and renewing policies at the request of California regulators, who were trying to arrange a sale of the insurance company. However, that request was recently withdrawn, he said.
Insurance regulators in other states have also issued orders of suspension for the California company, Donaho said.