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STATE OF MAINE
DEPARTMENT OF PROFESSIONAL
AND FINANCIAL REGULATION
BUREAU OF INSURANCE

INTRODUCTION

On October 31, 1996, Berkley Regional Insurance Company ("BRIC") filed with the Maine Bureau of Insurance a Form A Statement regarding the proposed acquisition of control of Acadia Insurance Company ("Acadia"). The change in control results from all of the common stock of Acadia Insurance Company being contributed from its current parent corporation, W. R. Berkley Corporation ("Berkley"), to BRIC. Since BRIC is wholly-owned by Berkley, the result of the transaction is to change Acadia Insurance Company's position within the Berkley holding company system from a direct subsidiary of Berkley to a second-tier subsidiary of Berkley.On November 2, 1996, BRIC filed a request for authorization to transact insurance business within the State of Maine. Also, on November 13, 1996, Acadia filed a Form D Statement regarding reinsurance agreements with BRIC which it proposes to become effective on January 1, 1996.A hearing upon the filing was held on December 4, 1996. Notice of hearing was provided to the parties and published in newspapers of general circulation in Maine, New Hampshire, and Vermont, the three states where Acadia maintains certificates of authority to transact insurance and where it primarily transacts business. Representatives of Acadia attended the hearing. Richard Sawyer, President of Acadia, and Charles Hamblen, Vice President of Finance, submitted prefiled testimony and testified at the hearing. In addition, John Vollaro, President and Chief Operating Officer of Berkley and BRIC, submitted an affidavit for the record. There were no intervenors.

STANDARDS OF LAW

Sections 222 and 3476 of Title 24-A set forth the standards to be applied by the Superintendent in considering whether to approve this filing. In pertinent parts, these statutes require the Superintendent to determine the following:

1. Whether, after the change in control, Acadia Insurance Company will satisfy the requirements for maintenance of its Certificate of Authority;2. Whether the financial condition of the applicant would be such after the change in control as to jeopardize the financial condition of Acadia Insurance Company or prejudice the interest of its policyholders;3. Whether the change in control may substantially lessen competition in insurance in this State or tend to create a monopoly therein or would violate any laws relating to monopolies or restraint of trade;4. Whether W. R. Berkley Corporation's future business plans for Acadia Insurance Company are unfair or prejudicial to policyholders;5. Whether the competence, integrity and experience of any of the persons who would control the operation of Acadia Insurance Company indicate that it would not be in the interest of the policyholders or the public to permit them to do so; and

6. Whether the acquisition of Acadia Insurance Company by Berkley Regional Insurance Company would tend to adversely affect the contractual obligations of Acadia Insurance Company or its ability and tendency to render service in the future to its policyholders and the public.

FACTS

Acadia Insurance Company began operations as a Maine-domiciled insurance company in June 1992. As a "start-up" operation, Acadia did not have an operating history and could not be viewed as a "seasoned" or "mature" insurer. At that time, it was determined to be appropriate to have Firemen's Insurance Company of Washington, D. C., an insurer authorized to transact insurance in Maine, as Acadia's parent. Firemen's also provided capital support and reinsurance to Acadia from Acadia's initial organization to the present. The operating and performance relationships inherent in this structure allowed Acadia to be assigned a superior rating by independent rating services. Acadia ownership was moved from Firemen's to Berkley, effective September 30, 1995.The proposed transaction is an internal corporate reorganization. Under its terms, the stock of Acadia will be contributed by W. R. Berkley Corporation to Berkley Regional Insurance Company, a 100% owned subsidiary of W. R. Berkley Corporation, assuming receipt of all necessary regulatory approvals, including approval from the Missouri Insurance Department as of December 31, 1996. Testimony at the hearing indicated that some states have already approved the transaction and the preliminary indications are that Missouri officials have indicated orally that the transaction should be approved before December 15, 1996.Following the close of testimony at the hearing, the record was held open pending the filing of final regulatory approval from the State of Missouri. A copy of that approval was filed on January 2, 1997. The approval from Missouri was rendered following receipt by Missouri of a commitment by Berkley to assure BRIC’s statutory surplus for the years ended 1997, 1998, and 1999, at a minimum to be the greater of 200% of the Risk Based Capital Company Action Level or $20,000,000. A further commitment from Berkley was made at the request of the Missouri Department of Insurance by which the Berkley agreed to reimburse BRIC to the extent in any calendar year the aggregate loss payments to the ceding companies under the multiple stop loss reinsurance contracts exceeds by $5,000,000 the aggregate premiums received by BRIC under such contracts. Pursuant to the proposed transaction as set forth in the Form A filing and hearing record, Acadia received $15 million in additional capital from the Berkley Regional Insurance Company on or before December 31, 1996. This infusion of capital will be in the form of cash. In addition, Berkley has indicated that it has forgiven the $5.3 million surplus notes as of October 1, 1996.Acadia’s expectation is that the proposed transaction will provide it with adequate capitalization given its current and anticipated net written premium, will provide it with an A. M. Best rating of "A+", Class IX, and will provide increased protection through the new reinsurance arrangements.Uncontroverted testimony indicated that neither Acadia's management structure nor senior management team will change as a result of the proposed transaction.Uncontroverted testimony indicated that Acadia's operations will not materially change as a result of the proposed transaction. Berkley confirmed that it has no plans to have Acadia declare an extraordinary dividend, liquidate Acadia, sell its assets, or merge it with or into any other entity or make any material changes in its business operations or corporate structure. Growth in staffing commensurate with maintaining the ability to service its book of business in a quality fashion is anticipated by Acadia.Information provided in the Form A Filing indicated that Acadia is currently the fourth largest property and casualty writer in Maine. While Acadia states that its expectation is that it will experience controlled growth in the Maine insurance market, no evidence suggests that the transaction will in any way lessen competition.The success of Acadia Insurance Company's business plan is, and has been, predicated, in material part, on its ability to maintain an "A" category rating from the A.M. Best Company. The proposed capital enhancement, reinsurance and business plan set forth by Acadia in its filing and at hearing can reasonably be expected to allow the Company to maintain the requisite rating.No evidence was presented to suggest that the proposed transaction would be unfair or prejudicial to policyholders of Acadia Insurance Company.After the change in control of Acadia Insurance Company, Acadia will continue to satisfy the requirements for maintenance of its Certificate of Authority.The financial condition of W. R. Berkley Corporation and Berkley Regional Insurance Company do not jeopardize the financial condition of Acadia Insurance Company or prejudice the interest of its policyholders.

ORDER

1. The Form A filing, as supplemented and amended, of Berkley Regional Insurance Company to acquire the issued and outstanding stock of Acadia Insurance Company is approved subject to the conditions and stipulations set forth above as conclusions.2. The Form D filing relating to reinsurance agreements between Berkley Regional Insurance Company and Acadia Insurance Company is approved as filed.3. Berkley Regional Insurance Company is hereby authorized to transact insurance business within the State of Maine.

NOTICE OF APPEAL RIGHTS

This Decision and Order is a final agency action of the Superintendent of Insurance within the meaning of the Maine Administrative Procedure Act. It is appealable to the Superior Court in the manner provided in 24-A M.R.S.A. Section 236 and M. R. Civ. P. 80C. Any party to the hearing may initiate an appeal within 30 days after receiving this notice. Any aggrieved non-party whose interests are substantially and directly affected by this Decision and Order may initiate an appeal on or before 40 days after issuance of this order. There is no automatic stay pending appeal; application for stay may be made in the manner provided in 5 M.R.S.A. Section 11004.

PER ORDER OF THE SUPERINTENDENT OF INSURANCE

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