On August 11, 2022, the US National Association of Insurance Commissioners’ (“NAIC”) Executive (EX) Committee adopted a request from the Restructuring Mechanisms (E) Working Group (“RM Working Group”) to reopen the Property & Casualty Insurance Guaranty Association Model Act (#540) (“Model Act #540”) for amendment to ensure that policyholders will retain guaranty fund coverage following an insurance business transfer (“IBT”) or corporate division (“CD”).
In In re Rehabilitation of Scottish Re (U.S.), Inc., C.A. No. 2019-0175-JTL (Del. Ch. Apr.18, 2022), the Delaware Court of Chancery ruled, as a matter of first impression, that in a delinquency proceeding for an insurance company under Delaware law, there is no per se requirement that a rehabilitation plan meet a “liquidation standard” to obtain court approval. Under the “liquidation standard,” a rehabilitation plan must provide claimants at least “liquidation value,” or the value they would have received in a liquidation proceeding.
“Without these [mediated] settlements, there is no Plan.”
- From Opinion on Plan confirmation, In re Boy Scouts of America, Case No. 20-10343, Delaware Bankruptcy Court, Doc. 10136, at 80 (issued July 29, 2022).
The Boy Scouts of America bankruptcy has achieved a milestone: on July 29, 2022, the Bankruptcy Court issues a 281-page Opinion on confirmation of Debtor’s Plan of Reorganization. The Opinion is generally favorable toward Plan confirmation but identifies a number of issues remaining to be resolved.
The decision we've all been waiting for is in -- the U.S.
On 18 November 2009, the Commission approved a restructuring and asset relief package for KBC under the EC State aid rules. KBC is a Belgian integrated banking and insurance group, based primarily in Belgium and Central and Eastern Europe. KBC has received three aid measures to support it during the economic crisis: in December 2008 a recapitalisation of €3.5 billion; in June 2009, a second recapitalisation of €3.5 billion and an asset relief measure on a portfolio of Collateralised Debt Obligations (“CDO”). Approval of these measures was subject to KBC submitting a restructuring plan.
The Third Parties (Rights Against Insurers) Act 2010 (“TPR”) will finally come into force on 1 August 2016, making it easier for third parties to bring claims against insurers of insolvent companies. It has taken more than six years, spread over three separate governments and was amended even before it came into force, but TPR will finally replace the Third Parties (Rights Against Insurers) Act 1930 (the “1930 Act”).
The Background
Directors and Officers (“D&O”) liability policies, like many other liability policies, often have an exclusion that precludes coverage when one insured sues another insured. Coverage, however, can be restored under certain exceptions. One of those exceptions is the bankruptcy exception, which allows a bankruptcy trustee or comparable authority to sue on behalf of the estate against another insured like a director or officer.
Bankruptcy and insurance have been engaged in a tangled web for decades. Claimants against bankrupt insureds are often frustrated in seeking a recovery that they might otherwise obtain if the insured had not gone bankrupt. In a recent case, the Third Circuit addressed the standing of a default judgment creditor claimant to sue the bankrupt insured’s insurance company to recover the default judgment.
The Ministry of Justice is seeking feedback from key stakeholders on the impact of Part 2 of the LAPSO reforms, which abolished the recoverability of success fees under CFAs and after the event insurance premiums.
Until April 2015 insolvency claims were exempt, enabling insolvency practitioners to pursue claims and if successful recover any success fee and more importantly after the event insurance premiums. There was concern at the time, that by abolishing the ability to recover the premium that insolvency claims would be stifled.