Utah insurance commissioner halts new client funds for Flair Airlines lenders
- The Utah Insurance Commissioner issued an emergency order halting new business for three struggling insurance companies owned by Advantage Capital Partners due to hazardous financial conditions.
- These companies were found to have negative capital and surplus, with significant investments tied to a single entity, violating state law.
- The order reflects a critical need for oversight in light of the poor financial outlook for both the insurers and their associated investments in Flair Airlines.
In the United States, an emergency order was issued by the Utah Insurance Commissioner on December 2, 2024, targeting three insurance companies associated with Advantage Capital Partners, which is an investor and lender for Flair Airlines. This intervention was prompted by a financial audit revealing that these insurers were in poor financial health, with capital and surplus indicators showing negative balances in the hundreds of millions of dollars. The audit indicated a significant violation of state law, as over 10 percent of their total investments were tied up in a single company, raising serious concerns among regulatory bodies. The companies involved are Sentinel Security Life Insurance, Haymarket Insurance, and Jazz Reinsurance, all owned by Kenneth King’s Advantage Capital Partners. The state regulators were particularly alarmed by the risk exposure faced by these insurers, who used funds from new policy sales to liquidate assets and cover their financial obligations. Due to the precarious financial situation they found themselves in, these companies are now barred from writing new policies for the upcoming year, although they are allowed to renew existing ones. The order highlights the urgent need for oversight, given that expected recoveries from loans made to Flair Airlines are estimated to be dismally low, ranging from approximately zero to eleven cents on the dollar. Advantage Capital Partners, which took over the role of major investor in Flair Airlines after a restructuring in the company’s ownership, has been navigating its own issues, as they also lend to 777 Partners, another significant investor that has faced legal challenges and financial distress. While Flair had previously named 777 Partners as its leading foreign investor, they later disclosed a shift in ownership to a related entity of A-Cap, though the specifics remain elusive. This movement of investment comes amid Flair's efforts to secure $150 million in financing, hinted through reports and statements made in November 2024. The operational districts of Flair Airlines have been affected by several financial and regulatory issues as well, including a tax obligation exceeding $67 million owed to the Canadian federal government regarding aircraft imports. The airline managed to reach a repayment agreement with the government, but this situation underscores the financial fragility of Flair Airlines and its investors. Furthermore, high-level changes within the company structure, including the appointment of a new chief financial officer and a shift in CEO duties, indicate an attempt to stabilize the airline during these turbulent times. The overall situation reflects a complex web of financial challenges amid regulatory scrutiny and looming deadlines, signaling trouble for both Flair Airlines and its supporting financial institutions.