Liquidation

Subscribe to Liquidation

As discussed in our post last month, it was a long road for Arrowood Indemnity to be placed into liquidation in Delaware. On November 8, 2023, it finally happened [see Liquidation Order]. What happens now?

State Guaranty Funds 

For many policyholders, it means falling into the guaranty association safety net. By statute, states have created guaranty associations (or in New York, security funds administered by the Liquidation Bureau) to pay covered claims owed by the insolvent insurance company. The National Conference of Insurance Guaranty Funds has a handy compilation of those statutes. But there are a few things you need to know.

First, recovery may be possible from multiple guaranty associations. Because each state sets its own requirements, more than one guaranty association may be applicable to any particular loss, including (1) the state where the policyholder was a resident at the time of the insured event; (2) the state where the “claimant” was a resident at the time of the insured event; and (3) the permanent location of property from which the claim arises. There may be numerous insureds, and numerous claimants, and numerous properties, depending on the situation.Continue Reading Arrowood Indemnity Company enters liquidation

At a time when, globally, insured businesses are under severe financial strain, the availability and extent of their insurance assets take on a new significance. It is significant not just for troubled businesses and their insurers, but also for third parties with potential or actual claims against those businesses. 

An insured may, for example, notify under a professional indemnity or other liability insurance in response to a third party claim. But if the insured goes into some form of insolvency process, will any insurance proceeds (or the right to those proceeds) form part of the insolvent estate? 

In many jurisdictions, that is the case and it would leave the third party claiming on the insolvent estate in competition with other creditors. In other jurisdictions, however, the law instead affords the third party more direct access to the insurance proceeds.

The UK falls under the latter category, based on the Third Parties (Rights against Insurers) Act 1930 (the “1930 Act”) and the Third Parties (Rights against Insurers) Act 2010 (the “2010 Act”). Continue Reading Even positive reforms can carry hidden risks –A potential limitation period “trap” in the UK’s Third Parties (Rights against Insurers) Act 2010