In a closely-watched case stemming from the demise of the Australian HIH insurance group, the UK House of Lords has ruled in McGrath & Anor & Others v Riddell and Others [2008] UKHL 21 that the English assets of four companies in that group, which are in liquidation in Australia and in ancillary insolvency proceedings in England, must be remitted to Australia for distribution under Australian insolvency law.

A recent report by Standard & Poor's ("S&P") noted that the number of U.S. insurers placed under regulatory supervision in 2007 was the lowest in a decade. The report attributes a decrease in insolvencies among property casualty insurers to, among other things, a mild hurricane season combined with better underwriting and an improved premium rate environment. S&P forecasted a stable outlook in the P&C sector for 2008, though noting that it expects net premiums to decline modestly after an extremely profitable 2007.

The auto parts supply industry has been beset by financial problems for several decades. Original equipment manufacturers ("OEMs") typically have the right to immediately seize their tooling, which the supplier holds in order to make parts. This allows OEMs to quickly move the tooling to another supplier and avoid an assembly line shutdown if the supplier fails. The right to immediately reclaim tooling, however, may be restricted if the supplier files for bankruptcy.

In an important recent decision of the United States Court of Appeals for the Second Circuit, testing the outer reaches of a bankruptcy court’s jurisdiction, In re Johns Manville Corp., 06-2099 (2d Cir. Feb. 15, 2008), the court considered whether claims that are not derivative of a debtor’s liability, but rather seek to recover directly from an insurer for its own alleged misconduct, can be enjoined by the “channeling” mechanism developed by the bankruptcy court.

In previous Alerts, we have addressed the complexities of claims in bankruptcy. Likewise, trading in claims and securities can present challenges. Difficulties have arisen in large Chapter 11 reorganizations as constituencies engaged in the Chapter 11 process, who are major players in the case, seek to trade in securities relating to that case. This Alert explores the impact that some trading activities may have on potential recoveries in the bankruptcy and the help (and impact) of the Internal Revenue Code.

In a matter of first impression under New Jersey law that potentially impacts both the reinsurance and insurance industry and policyholders of insolvent insurance companies, the New Jersey Supreme Court affirmed the appellate division's ruling that the Fourth Amended Final Dividend Plan (the "FDP") proposed by the Liquidator for Integrity Insurance Company ("Integrity") should not be approved because it unlawfully allowed incurred but not reported (“IBNR”) claims to share in the insolvent insurer's estate. See In the Matter of the Liquidation of Integrity Ins.

The case of Law Society v Dixit Shah (2007) EWHC 2841 (Ch) arose from the intervention of the Office for the Supervision of Solicitors into an association of firms owned by Dixit Shah which traded under "the BJ Brandon Group" name. The Law Society alleged that the OSS discovered that around £12.5 million of client money had been misappropriated by Mr Shah.

Executive Life Insurance Company of New York (ELNY) was placed into rehabilitation in 1991 after affiliated companies became insolvent and concerns about its future solvency arose. The rehabilitation plan adopted in 1992 involved the transfer of much of ELNY's business to another carrier; however, ELNY in rehabilitation retained substantial assets and continued payment on certain annuities, with the bulk of the payout going to structured settlement annuitants that had received long-term and/or lifetime annuities as settlements in personal injury lawsuits.

If you hold a claim in bankruptcy by way of a transfer, you may need to be sure the transaction was accomplished by a sale and not merely by an assignment. Yet another decision highlights the growing complexity in bankruptcy claims as we discuss below.

Recently, a New York state court gave the New York Liquidation Bureau ("NYLB") permission to notify more than 300,000 creditors of Union Indemnity Insurance Company (“Union Indemnity”) that it plans to make the first distribution from the insolvent property casualty insurer's estate. See In Re Union Indemnity Ins. Co., No. 41292/85 (N.Y. Sup. Ct., Oct. 10, 2007).