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New York Liquidation Bureau
Maria T. Vullo
Superintendent as Receiver
 

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Frequently Asked Questions



Insolvency

What is insolvency?


An insurance company is declared to be insolvent when it no longer meets the statutory definition of solvency. Even though the company may still have assets, the company is deemed to be "Unable to pay its outstanding lawful obligations as they mature in the regular course of business ..." and the existing assets of the company are then preserved to allow for the settlement of outstanding claims and debts to creditors.

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How does insolvency affect my claim?


Unfortunately, the rehabilitation or liquidation of an insolvent insurance carrier usually means a delay in the settlement of outstanding claims. Where a solvent insurance company may settle claims in a matter of weeks, the complications of dealing with an insolvent company can lengthen the process considerably.

This is the case for a number of reasons. All outstanding claims need to be investigated, and coverage must be verified. Oftentimes there are delays in receiving or reconstructing files. Once a claim is investigated, and coverage is established, many settlements must be approved by a judge, as the laws of New York State require that disbursements of an insolvent company's assets be approved by the court.

Once the settlement is approved, it then is submitted to one of the Security Funds, depending upon the type of claim. When the Fund releases the money for the settlement, it is sent to the claimant.

It is often impossible to predict with any degree of certainty the time involved from start to finish. The New York Liquidation Bureau staff will do everything in their power to expedite all claims - but because there are other entities involved in the process, we ask that you understand that there will be extra time involved. We are happy to answer your questions at any time, and will do our best to make this difficult and time-consuming process as painless as possible.

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What are we doing to make the process faster?


The NYLB is dedicated to reducing the amount of time required to settle claims and to close estates. We have committed to a reorganization and streamlining process that will enable us to achieve more while becoming more economically efficient at the same time - fulfilling our fiduciary responsibilities to claimants and creditors.

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What is meant by Domestic?


Domestic, as it applies to the New York Liquidation Bureau, means that the company was domiciled (headquartered) in the State of New York and the Superintendent of Financial Services was appointed Rehabilitator or Liquidator.

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What is meant by Non-Domestic?


Non-Domestic, as it applies to the New York Liquidation Bureau, means that the company was not domiciled (headquartered) in the State of New York. However, the company conducted an insurance business in the State of New York and the Superintendent of Financial Services was appointed Ancillary Receiver. Under New York Insurance Law, covered claims are paid by three funds - the New York Property / Casualty Insurance Security Fund, the New York Public Motor Vehicle Liability Security Fund, and the New York Workers Compensation Security Fund.

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Show Cause

What is an Order to Show Cause?


When the New York State Department of Financial Services determines that an insurer is operating under financially hazardous conditions, the Department petitions the Court for an order requiring said insurer to “show cause” why the company should not be placed into liquidation.  Depending on the outcome of this process, a rehabilitation or liquidation order may be issued appointing the Superintendent of Financial Services as Receiver.

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Rehab Efforts

What is meant by Rehabilitation?


Rehabilitation means that an effort is being made to resolve the company’s issues and return it to the marketplace.  The Court, by way of an Order of Rehabilitation, appoints the Superintendent of Financial Services as Rehabilitator and steps are taken toward the removal of the causes and conditions which made the proceeding necessary.  All persons other than the Superintendent are generally restrained from further transaction of the insurer’s business.

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Liquidation

What is meant by Liquidation?


Liquidation means that the Court, by way of an Order of Liquidation, places the insurer under legal supervision and control of the Superintendent of Financial Services within its state of domicile.  During the liquidation process, all policies are cancelled and premiums returned to the former insureds.  All assets are marshalled and generally liquidated.  Applicable Guarantee Funds are triggered.  All claims against the insurer are identified, quantified, and adjudicated.  Finally, an equitable distribution of the insurer’s assets is made to its creditors and the proceedings are closed.

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What is meant by “assets are marshalled?”


Under the Court’s supervision, the Liquidator must control the gathering of the insurer’s assets.  It generally converts the assets into cash and distributes same to the insurer’s claimants.  Payment of claims is prioritized in accordance with statutory law.

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What is a Guaranty Fund?


A Guaranty Fund, as described by the NAIC, is “a mechanism in place for the payment of covered claims arising from the insolvency of an insurer.  Insurance guaranty mechanisms obtain the funds necessary to pay claims by assessing solvent members of the insurance industry.”

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What is meant by Conservation?


Conservation, as it applies to the New York Liquidation Bureau, refers to companies that did business as excess and surplus insurers (Regulation 41) and the Superintendent of Financial Services was appointed Conservator of trust assets.

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Discharge

How are liquidation proceedings closed?


Upon conclusion of its primary obligations (marshaling assets, liquidating assets, adjudicating claims, and making distributions to creditors) the liquidator will generally petition the Court for an order approving a final distribution, closing the estate, and discharging the liquidator.  Arrangements may be made and certain records may be temporarily retained in order to address post-closure inquiries.

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Are ancillary receiverships also closed?


As explained by the NAIC, “Ancillary receiverships should be closed before the domiciliary receivership begins closure proceedings.  Closure of an ancillary receivership is generally less complicated than closing a domiciliary proceeding.  There may be special deposit claims that will either be paid in full or will share pro-rata in the special deposit.”

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