TRACO, Steward's captive insurer in Panama

analysisA captive insurer is an insurance company owned by the group whose risks it covers. Steward Health Care System LLC's audited 2020 financial statements list TRACO International Group S. de R.L. as one of the four business units of Steward's subsidiaries at December 31, 2020: a captive insurance company incorporated and based in Panama that provides professional and general liability insurance. Steward, certain affiliates and associated physicians obtained medical malpractice and comprehensive general liability cover from TRACO on a modified claims-made basis, through a claims-made policy and a policy for incurred-but-not-reported (IBNR) claims, for a fixed, actuarially determined annual premium. The system's net professional and general liability accrual was $128.9 million at December 31, 2020 and $125.3 million at December 31, 2019. TRACO participated in two layers of excess liability coverage above its primary policies, each with limits of $25.0 million per claim and $25.0 million in annual aggregate for professional liability and for general liability, and the system reinsured 100% of the excess coverage. ¹

analysisAccording to the declaration of independent manager Alan J. Carr supporting confirmation of the debtors' Chapter 11 plan, at the petition date the debtors obtained professional liability coverage through TRACO, a wholly owned non-debtor subsidiary incorporated and domiciled in Panama, which also provided general, excess, workers' compensation and employer liability coverages and insured certain employed and affiliated physicians. TRACO contracted administrators, counsel and consultants, but Steward Health Care System LLC (SHCS) paid for these services and paid claims under TRACO policies, including judgments and settlements, creating intercompany payables owed by TRACO to SHCS. ²

analysisA trade-press report from October 2026, relaying newspaper reporting, states that Steward moved TRACO from the Cayman Islands to Panama in 2019, in part to take advantage of lighter regulation there; that the insurer is not licensed in Massachusetts and the state's Division of Insurance said it lacked legal authority to monitor TRACO's solvency; and that TRACO at one point covered 1,400 medical practitioners nationwide, with limits typically capped at $6 million a year per clinician. The move and its motive are not documented in registry or regulatory records in the reviewed material. ³

analysisThe master lease of October 3, 2016 between Medical Properties Trust entities as lessor and Steward entities as lessee accepts Tailored Risk Assurance Company, Ltd., defined in the lease as 'Traco', as an insurer for certain required liability coverages without the minimum rating demanded of other insurers, and lists Tailored Risk Assurance Company, Ltd. among the 'Excluded Subsidiaries' in its Exhibit D. The documents reviewed do not establish whether this company and the Panama-based TRACO International Group S. de R.L. are the same legal entity. ⁴

analysisThe consolidated corporate ownership statement filed with Steward's May 6, 2024 petition lists TRACO International Group S. de R.L., a non-debtor, as owner of 30.17% of Davis Hospital & Medical Center, LP and 12.36% of Odessa Regional Hospital, LP, and in the May 5, 2024 omnibus consent TRACO signed as a limited partner of both partnerships through Michael Callum, M.D., as its President. TRACO Investment Management LLC was among the affiliates of Steward Health Care System LLC that filed Chapter 11 petitions on May 6, 2024; the same ownership statement lists TRACO as owning 99.99% of it, and in the consent Steward Health Care System LLC signed as its Class A member, Class B member and managing member. ¹

analysisA trade-press report relaying newspaper reporting states that Michael Callum, a former Steward executive vice president, served as TRACO's president from 2019 to 2024, and describes Rubén José King-Shaw Jr. as TRACO's current CEO and president; according to the report, in September 2024 the two told physicians that Steward was reserving funds during the bankruptcy to cover new claims and would continue defending old ones. Callum's presidency is documented by his signature for TRACO as President in the May 5, 2024 bankruptcy consent; the other roles and statements rest on the press account. According to the report, neither Callum nor King-Shaw responded to the newspaper's requests for comment. ^{2 1}

analysisA trade-press report relaying newspaper reporting cites a 2024 newspaper investigation as finding that Steward executives had for years removed cash from TRACO and left IOUs - written acknowledgements of debt - in its place, and that by mid-2024 the insurer had $3.5 million in cash while facing more than 500 malpractice claims. These are the findings of a newspaper investigation, not of a court or regulator; according to the report, TRACO's attorney declined to comment to the newspaper on the insurer's financial condition. ¹

analysisAccording to a trade-press report relaying newspaper reporting, in two cases Massachusetts Superior Court judges ordered former Steward physicians to pay personally six-figure malpractice settlements that the physicians say TRACO negotiated but failed to fund, and hundreds of other cases have been put on hold indefinitely; the court orders themselves are not in the reviewed record, and that TRACO negotiated the settlements is the physicians' position. Boston Medical Center Health System, which bought two of the hospitals, said responsibility for such claims rests with TRACO and that it would support physicians with shortfalls on tail claims - claims brought after the coverage period - only if TRACO is declared insolvent. The buyer of Steward's hospitals in Methuen and Haverhill said primary responsibility for those claims remains with TRACO, with any underfunding concerns addressed through the bankruptcy courts, and TRACO's attorney declined to comment to the newspaper. No declaration of TRACO's insolvency had been made, according to the report, and a spokesperson for the Massachusetts Executive Office of Health and Human Services said the state had asked the bankruptcy judge to step in, warning that TRACO had 'little to no independent capital' to pay claims. ¹

analysisAn order of the U.S. District Court for the Northern District of Ohio dated June 17, 2025 records that TRACO International Group S. de R.L. was actively litigating an adversary proceeding against Steward Health Care System LLC - a lawsuit brought within Steward's bankruptcy case in the Southern District of Texas (Adv. No. 24-03261, filed December 6, 2024). A trade-press report, citing court filings referred to by a newspaper, states that TRACO has repeatedly pressed the bankruptcy court to force Steward to pay roughly $250 million to settle its IOUs; this summarises TRACO's position, and no ruling on the amount is in the reviewed record. The debtors' side, in the declaration of independent manager Alan J. Carr, states that Steward Health Care System LLC paid TRACO's service providers and its claim payments, including judgments and settlements, creating intercompany payables owed by TRACO to Steward Health Care System LLC. ^{1 2 3}

analysisOn February 10, 2025 a Trumbull County malpractice claimant sued TRACO International Group S. de R.L. in the U.S. District Court for the Northern District of Ohio (No. 4:25-cv-00259) for breach of contract and bad-faith handling of an insured's claim, alleging that TRACO failed to pay a $535,000 settlement agreed in April 2024 in a malpractice lawsuit against Steward Health Care System, its Trumbull Memorial Hospital and an employed physician; the plaintiff says TRACO took part in the mediation and agreed to the settlement. After the plaintiff reported that attempts to serve TRACO at Steward's Dallas headquarters had failed, Judge Benita Y. Pearson on June 17, 2025 extended the deadline for service to July 11, 2025 and allowed service by email on TRACO's counsel in the bankruptcy adversary proceeding. That order addressed only service of process, and no ruling on the merits is in the reviewed record. ¹

analysisIn his declaration supporting confirmation of the debtors' plan, independent manager Alan J. Carr stated that TRACO is managed by three former board members - Ralph de la Torre, Michael Callum and Rubén King-Shaw - who before October 2024 were also, or had been, officers or directors of Steward Health Care System LLC, and that he believes the debtors would have claims against the three for breach of fiduciary duties of care, loyalty and good faith for conduct related to TRACO. The assessment followed the board's internal investigation and identifies potential claims; it is not a court finding, and no response by the three individuals to it was found in the reviewed record. ³