Amaca Pty Ltd v McGrath & Anor as liquidators of HIH Underwriting and Insurance (Australia) Pty Ltd [2011] NSWSC 90
Over the past few months there have been a number of insurance portfolio transfers and a winding up of a general insurer. Various judges of the Federal Court have considered aspects of the Insurance Act (Cth) 1973.
Portfolio transfers
There have been two scheme transfers of insurance portfolios from Australian branches of overseas insurers to Australian subsidiaries. While objections to the transfers were raised, the Federal Court confirmed the schemes.
The United States Bankruptcy Court for the Southern District of New York granted preliminary injunctions ordering a directors and officers liability insurer to advance defense costs, despite the fact that the insurer had denied coverage, and without adjudicating the coverage defense. Axis Reinsurance Co. v. Bennett et al., Adv. No. 07-01712 (S.D.N.Y. Bankr. Aug. 31, 2007); Grant v. Axis Reinsurance Co., Adv. No. 07-2005 (S.D.N.Y. Bankr. Sep. 11, 2007). The bankruptcy court applied New York law and relied heavily on the case In re WorldCom, Inc.
In addition to the general insolvency measures found in the Insolvency Act 1986, insurance intermediaries are subject to specific client money rules, which have a particular effect if they become insolvent. Though in the context of investment firms rather than the insurance sector, the recent UK Supreme Court case of Lehman Brothers International (Europe) (in administration) v CRC Credit Fund and ors [2012] UKSC 6 (LBIE) is a useful decision against which to consider the application of many of these client money rules.
First publised in CRI
Key Points:
Section 562A of the Corporations Act does not apply where liquidator realises a sum of money by assigning the proceeds of the reinsurance claim to a third party.
Liquidators of insurance companies face a major quandary when assessing reinsurance recoveries.
A new Court decision may undercut the legislative policy that reinsurance proceeds should be quarantined from the normal rules for paying out creditors of insolvent companies.
Your insurer goes bust – can you as an insured claim the reinsurance proceeds? An important decision in the NSW Supreme Court gives useful guidance on when a court will allow departures from the statutory scheme controlling the application of reinsurance proceeds (Amaca Pty Ltd v McGrath & Anor as liquidators of HIH Underwriting and Insurance (Australia) Pty Ltd [2011] NSWSC 90).
The insurer goes broke, and there are all these claimants at the door…
On 26 August 2015, the Board of the Romanian Financial Supervisory Authority (“FSA”) analysed the status of the Romanian insurance undertaking ASTRA SA, considering the report of the special administrator, KPMG Advisory.
According to the FSA, on 30 June 2015, ASTRA SA had: (i) a negative available solvency margin of approximately RON 871 million (approximately EUR 197 million), (ii) a liquidity ratio of 0.03, and (iii) a capital shortage of approximately RON 968 million (approximately EUR 220 million).
On 16 April 2014, the Official Gazette published Norm 5 of 2014 of the Romanian Financial Supervisory Authority (the“FSA”) as a supplement to several regulations relating to the calculation of the re/insurer’s solvency margin, the minimum solvency margin and the safety fund (“Norm 5/2014”).
The Romanian government has adopted, by means of Government emergency ordinance no. 91, the Insolvency Code. The Code gathers and amends all pre-insolvency and insolvency provisions in Romanian legislation relating to companies, groups of companies, credit institutions, insurance and reinsurance companies, as well as cross-border insolvency proceedings. It will enter into force on October 25, 2013 and will also apply to already ongoing insolvency proceedings.