A company that insured billions of dollars of private student loans faces insolvency, raising concerns about smaller financial institutions’ ability to lend money to students heading to school this fall, WSJ Pro Bankruptcy reported. South Dakota’s insurance regulator has moved to shut down ReliaMax Surety Co., a Sioux Falls, S.D.-based company that offered insurance against losses to financial institutions that originated private student loans. The company, a subsidiary of ReliaMax Holding Co., provides insurance on about $2.7 billion in loans made by more than 400 lenders. Private student loan insurance has been a relatively safe investment because loss rates in the sector have been low compared with other types of consumer debt. But losses on some ReliaMax-insured loans began to creep up in recent years. The company also found it had priced premiums too low for the policies of those older loans that weren’t being repaid.
