ATIC New York Taxi Insurer Insolvent

The headquarters of American Transit Insurance Co. in Freeport, a few miles into Nassau County. The 52-year-old, family-owned firm is vital to how New Yorkers zip around the city. American Transit, also known as ATIC, insures roughly 60% of New York City’s more than 117,000 commercial taxis, livery cabs, black cars and rideshare vehicles.

It’s insolvent - ATIC has for decades been the dominant player in New York City’s commercial car insurance market, the largest in the country, offering cabbies premiums far lower than other insurers. In the second quarter, it posted more than $700 million in net losses.

The losses follow years of warnings from industry analysts, and disagreements between ATIC and its third party actuary. The company’s reserves have been considered deficient for decades and the problem has come to a head as the company wrestles with larger claim sizes driven by bigger settlements as well as jury and arbitration awards. A potential ATIC failure would mean tens of thousands of taxi drivers without insurance, throwing the city’s complex transit ecosystem into turmoil.

The insurer’s losses grew so large that they have crossed a threshold known as a “mandatory control level event". 

Too Big to Fail - There is a perception that they are too big to fail; There would be a large void in the ability to get a taxi or an Uber or a Lyft or a limo in New York as all of these vehicles would suddenly be without insurance.”

The only other insurance carriers that would be able to pick them up currently would possibly struggle with the volume of business. In that case, “every taxi driver or limo driver is going to have a significant increase in their insurance premium” as rates adjust to reflect real risk. That could upend an industry already battered by headwinds including increased competition and plunging medallion values.

The premiums that they were charging were not commensurate with the risk they were taking on. It raises questions over ATIC’s ability to pay claims. Uber Technologies Inc. sued ATIC in federal court in February, accusing the insurer of “a pattern and practice of failing to adhere to reasonable claims-handling practices and failing to reasonably resolve claims,” resulting in 23 lawsuits brought against Uber and its drivers over crashes involving bodily injuries. That left the ride-share giant to pay “substantial amounts” to defend itself.

In 2021, a actuarial consultant found the company was roughly $500 million short of the money considered necessary to cover its unpaid losses and loss-adjustment expenses. That kind of determination is exceptionally rare. ATIC’s responded to S&P that he didn’t agree with Huggins’ opinion because of the “unique nature” of the New York market.

If corrective action is not successfully implemented by the company and further adverse development continues, the possibility exists the company could be placed in some form of receivership or liquidation.