If you walk through the Río Piedras campus of the University of Puerto Rico (UPR) and suddenly realize that the building next to the Facundo Bueso is not there anymore or if you have heard about students in classrooms with fallen ceilings and stench of mold, think of a name: Real Legacy Assurance.
And if you're a Tren Urbano user, and you run into stairs and elevators that have long been out of service, you see moldy wall coverings, lights that don't work, or you even don´t have to pay the fare to get on the train, think Real Legacy, too.
After Hurricane María struck the island in 2017, the UPR and the Tren Urbano suffered severe damage to their facilities, they thought they could make the repairs once their insurer paid them. However, Real Legacy failed to meet its obligations, leaving –in just those two cases- $240 million in debt, according to officials from both agencies.
Last year, after Cooperativa de Seguros Múltiples decided it would not inject more capital into its subsidiary, the Office of the Insurance Commissioner (OCS, Spanish acronym) intervened Real Legacy, and proceeded with its liquidation this year. The situation arose after its reinsurance fell by more than $120 million.
After the hurricane, we filed the insurance claim and at the beginning the gave us $5 million in advance payments. We worked with them (Real Legacy) and reinsurers during 2018 and then, in September, the rehabilitation information came and we decided to reach an agreement,” said Carlos Marrero Miranda, associate director of Finance and Director of Insurance for the UPR.
According to the official, the UPR considered suing Real Legacy, but concluded that it could be a tedious process and there was a risk of not recovering anything because of the OCS intervention.
However, Real Legacy did not even pay for half of the damage. The UPR identified damage for $200 million and their disaster insurance was for $100 million. The University agreed on $38.5 million, including the $5 million they received in advance.
We are working aggressively on searching for funds and we expect the resources will come and we are positive about being able to repair structures,” said Adrián López Nunci, in charge of the UPR Physical Development and Infrastructure. He added the University had no option but to request funds from the U.S. Education Department to make the necessary repairs on the 11 campuses.
At the mercy of federal funds
Alternativa de Transporte Integrado (ATI), the agency responsible for Tren Urbano, still suffers the effects of Hurricane María.
"Every day, I have problems with the tickets. If the system fails, I have to let the user get on the train without paying," said Josué Menéndez, executive director of ATI.
According to Menéndez, water from the storm damaged the tickets service and when they go down, ATI has to let users on the train without paying. The railway electrification and radio communication systems were also affected by the hurricane.
“Every time that happens, we lose money,” said Menéndez while adding that he still finds it hard to believe that Real Legacy has not paid their insurance claim. “We made an attempt but they are insolvent, we are waiting for the Commissioner´s (OCS) decision,” he noted.
Tren Urbano identified damage for $175 million. Experts from the Federal Transit Administration (FTA) estimated the damage for ATI. EStimates for mitigation projects total another $25 million, Menéndez said.
However, ATI barely received $1.5 million, it has a $300 million policy with Real Legacy.
“I can´t think of a better resource to identify and estimate the dame,” said the official about the FTA while stressing that ATI did not hire public adjusters or attorneys for their claim.
Deteriorated boarding platforms and stairs out of service discourage the use of the train.
Siemens is operating the trains so, regardless of its use, ATI still has to pay for that contract every year.
Ever since criticisms arose about claims management, insurance companies suggest they cannot pay because public adjusters and lawyers have become obstacles with the clients.
According to Menéndez, ATI depends on funds from the Federal Emergency Management Agency (FEMA) and FTA to fully restore the Tren Urbano service. Although ATI has been approved funds, FTA guidelines and requirements are so complex that they could only access $4 million.
Meanwhile, according to López Nunci, the UPR has managed to direct projects in its 11 campuses after receiving about $30.2 million from federal education, another $30 million from FEMA and after identifying savings totaling $8 million that was distributed to all the campuses for painting, wall renovation, and other repairs.
Even so, there are still key projects without a clear future, such as the repairs and reopening of the Torre Norte university residence in Río Piedras.
While Real Legacy's financial weakness came clearly to light after Hurricane María, for years, Cooperativa de Seguros Múltiples' subsidiary operated with deficiencies repeatedly pointed out by OCS and revealed by El Nuevo Día.
However, multiple producers and insurance agencies, including those providing services to the government, recommended property and contingency policies with Real Legacy. This was despite it was an open secret in the insurance industry that the premiums charged by the insurer would not be sufficient to respond to a disaster.