Summary: In May 1991, Monarch Life Insurance Company of Springfield, Massachusetts, was placed in receivership by the Massachusetts Division of Insurance. State insurance regulators took this action to protect the policyholders and to safeguard Monarch Life from the difficulties of its parent company, Monarch Capital Corporation ("the holding company"). GAO concludes that real estate investment losses of the parent holding company endangered Monarch Life's solvency and led to the regulatory takeover. The Massachusetts Division of Insurance was unaware of Monarch Life's solvency problems until November 1990, when the holding company disclosed its inability to repay loans from Monarch Life. In part, Massachusetts regulators were unaware because Monarch Life did not disclose the extent and riskiness of its transactions with affiliated companies. Deficiencies in the last triennial examination of Monarch Life also contributed to regulators overlooking the riskiness of Monarch Life's dealings with affiliated companies.
