Deputy Insurance Commissioner Dan Schwartzer has resigned from his position with the Wisconsin Office of the Commissioner of Insurance to oversee a portfolio of billions of dollars worth of risky policies written by Ambac Assurance Corp.
The Ambac account is currently being rehabilitated by the state.
The Office of the Commissioner of Insurance announced the move in a statement
State Insurance Commissioner Ted Nickel has the sole authority to make such an appointment, but went through a recommendation process with a panel that included a Department of Administration representative and two outside state insurance commissioners because of the account's enormous scale.
Schwartzer was chosen from a pool of around seven applicants, OCI spokesperson J.P. Wieske said.
Nickel submitted Schwartzer's appointment
for approval to the Dane County Circuit Court on May 12. The appointment was approved Monday.
Schwartzer, who was paid around $116,000 annually as deputy insurance commissioner, will be paid $360,000 a year by Ambac to work as special deputy commissioner of the account, according to a copy of the appointment application filed with the court. No taxpayer money will be used to pay Schwartzer's salary.
In 2010, Sean Dilweg, then state insurance commissioner, asked Lafayette County Circuit Judge William D. Johnston to take control of $67 billion of Ambac's riskiest credit default swaps, mortgage-backed securities and certain student loan policies. The policies were placed in an account over which Dilweg was given broad regulatory authority that was segregated from the bond insurer's other assets.
Dilweg was concerned about Ambac's financial condition in the wake of the 2008 financial crisis since it was contractually obligated to pay out huge sums of money to certain parties if some of its assets, such as mortgage bundles, went into default. Many did.
State control over those risky policies to establish limits on how much Ambac paid on its short-term financial obligations was a way to preserve the company's other assets so it could continue paying its long-term obligations as a municipal bond insurer.
It is unclear how long the account will remain in rehabilitation, however, as of March 31 the Ambac account's exposure was valued at $13.8 billion, Wieske said, a 79 percent drop from when the state OCI took control in 2010.
Though Ambac's headquarters are in Manhattan, the company has kept its legal residence in Wisconsin, where it was founded in the 1970s. That gave the state the ability to regulate the account.
Schwartzer has been deputy commissioner of insurance since 2011 and oversaw the agency's regulatory, public information and administrative functions. Since Feb. 17, he worked as both deputy commissioner and commissioner of the segregated Ambac account, after the account's previous chief, former state insurance regulator Roger Peterson, left the position.
Peterson resigned from his position with the state Office of the Commissioner of Insurance to oversee the Ambac account under similar circumstances in 2011, but was paid significantly more by Ambac than Schwartzer will receive.
Peterson's annual compensation was $600,000. His contract also included a $375,000 bonus if he stayed on the job for more than 40 months. He also received a $7,500 monthly housing allowance for three months.
Wieske said the court approved both men's salaries, and that anticipated cost of living expenses played a large role in determining Schwartzer's compensation. While Peterson was required under his contract to live in New York City, Schwartzer will be able to remain in Wisconsin, where living expenses are significantly lower.