Utah Insurance Commissioner Jon Pike has petitioned the court to place Sentinel Security Life Insurance Co., Haymarket Insurance Co., and Jazz Reinsurance Co. under rehabilitation, according to BestWire.
These companies, affiliated with Advantage Capital Management LLC, face allegations of insolvency and non-compliance with state insurance regulations.
The move follows an administrative law judge’s decision to pause an emergency order that barred the companies from issuing new policies.
According to the petition, A-Cap Chairman and CEO Kenneth King has a long record of self-dealing, conflicts of interest, and obfuscation. Pike alleges that insurance premiums from the three companies were diverted as investment capital to other A-Cap-controlled firms, which collected management fees.
These fees grew as the expected investment returns increased, pushing the companies toward high-risk strategies.
Since 2020, the companies have collaborated with 777 Partners LLC. Initially, 777 Partners agreed to reinsure the companies’ liabilities, allowing them to write new coverage without boosting capital reserves.
Subsequently, the companies issued short-term loans, structured as high-yield investments, to entities controlled by 777 Partners.
The petition claims that A-Cap invested more than $2.1 bn, or about 26% of the three insurers’ admitted assets, into various 777 Partner ventures. Over time, A-Cap became the largest investor in 777 Partners, and Kenneth King eventually took control of the entity.
The petition alleges that these investments have underperformed, requiring ongoing funding to prevent defaults and mask losses.
One example cited involves a 2022 loan of $46 mn to 777 Partners, maturing in less than a year.
The loan terms were altered over 100 times, pushing the outstanding balance to over $500 mn by the end of 2023.
Utah insurers were responsible for $270 mn of this balance. Eventually, 777 Partners became insolvent, rendering the loan worthless.
In April 2024, the regulator ordered A-Cap to divest from 777 Partners. Instead, the companies invested an additional $400 mn throughout 2024.
The regulator’s review revealed that the companies violated state code by excessively investing in a single entity, causing their risk-based capital ratios to fall into critical territory.
By December 2024, the regulator issued an order prohibiting the companies from writing new insurance policies. This prohibition was subsequently stayed, but the financial and regulatory challenges persist.
Jon Pike has served as Utah Insurance Commissioner since January 5, 2021. Pike worked in several positions with Intermountain Healthcare from 1990 through 2020, including 26 years as the southwest Utah operations director for SelectHealth, the health insurance division of Intermountain Healthcare.
In 2007, Pike was elected to the St. George City Council and in 2013 he was elected mayor of St. George, where he served until January 2021. Pike currently serves on the boards of Encircle St. George, the Southwest Utah Symphony and Orchestra, the Southern Utah Bicycle Alliance, and as a member of the National Association of Insurance Commissioners.
Pike received a bachelor’s degree in finance from the University of Utah and an MBA from Westminster College. Pike loves singing, playing the piano, organ, and guitar, as well as water and snow skiing, motorcycling, and walking or biking. He and his wife Kristy have five children and six grandchildren.
