The UK’s Prudential Regulation Authority (PRA) has published a Consultation Paper (CP) “CP32/16 Dealing with a market turning event in the general insurance sector“. The CP attaches a draft Supervisory Statement (SS), which sets out the PRA’s expectations “in relation to significant general insurance loss events which might affect firms’ solvency and future business plans“.
A recent decision by the Bankruptcy Court for the District of Delaware in PAH Litigation Trust v. Water Street Healthcare Partners L.P. (In re Physiotherapy Holdings, Inc.), Case No. 13-12965 (KG) (Bankr. D. Del. June 20, 2016), may limit the types of transactions that are subject to the “safe harbor” protections of section 546(e) of the Bankruptcy Code.
The Bankruptcy Code permits a bankruptcy trustee to compel return of a payment made to a creditor within 90 days before a bankruptcy petition. 11 U.S.C. § 547(b)(4)(A). The justification for compelling the return of preference payments is to level the playing field among creditors by not rewarding those who, perhaps, pressed the debtor the hardest on the eve of bankruptcy.
On May 16, 2016 the United States Supreme Court issued an opinion regarding the meaning of “actual fraud” under the Bankruptcy Code. Husky Int’l Electronics, Inc. v. Ritz represents a win for creditors by making it easier to show that a debtor committed fraud. A showing of a more general fraud, as opposed to a specific false representation by the debtor, will suffice to prevent certain debts from being discharged in bankruptcy.
Background
A statutory instrument has recently been passed providing that the Third Parties (Rights Against Insurers) Act 2010 will, finally, come into force on 1 August 2016, some six years after it was first passed.
The act will replace and, in general, streamline the procedures put in place by the Third Parties (Rights Against Insurers) Act 1930. Perhaps the two most significant changes brought about by the 2010 Act are:
The Copenhagen Reinsurance Company (CopRe) asked the UK High Court to make an Order sanctioning the intra-group transfer of the whole of its (re)insurance business to the Marlon Insurance Company (Marlon). Each of CopRe and Marlon wrote US excess and surplus lines insurance, and each of them maintained an excess and surplus lines trust fund in New York. The purpose of the transfer was to simplify the structure of the Enstar group. If the transfer was sanctioned, CopRe would be dissolved without winding up.
As discussed in an earlier post called “Going Up: Bankruptcy Code Dollar Amounts Will Increase On April 1, 2016,” various dollar amounts in the Bankruptcy Code and related statutory provisions were increased for cases filed on or after today, April 1, 2016.
The Seventh Circuit (which covers Illinois, Indiana, and Wisconsin) appears to have added a new and potentially conflicting standard in analyzing a third-party transferee’s “good faith” defense to a fraudulent transfer claim. The good faith defense protects a third-party transferee from having to return the value it received from a debtor as a part of a fraudulent transaction so long as that third-party transferee entered into the transaction with the debtor in good faith.
Equitable subordination in bankruptcy can be a powerful tool, providing a court with considerable latitude to set things right insofar as the estates of the penniless and the rights of their creditors are concerned.
This post originally appeared on In The (Red): The Business Bankruptcy Blog, which I created for CEOs, CFOs, boards of directors, credit professionals, in-house counsel and others to stay informed about important business bankruptcy issues and developments.