The New York Liquidation Bureau (NYLB) has released its 2012 annual report stating that the Bureau distributed a record $345.6 million in estate assets to insurance policyholders, claimants and creditors, while also significantly reducing the number of outstanding policyholder claims by nearly one-third.
"The Bureau is making significant progress in resolving claims so that money gets out the door faster to the policyholders and claimants. We are closing a number of longstanding estates and accelerating the pace of newer estates closings," stated Benjamin Lawsky, Superintendent of Financial Services.
Significant events of the past year include Financial Guaranty Insurance Co. being taken into rehabilitation in July, and Frontier Insurance Co. liquidating in November — it had been placed under rehabilitation in October 2001 and was a major estate the NYLB has been managing in all its complex relationships.
The $345.6 million distributed in 2012 – a record high – compares to $84.7 million distributed in 2011. The distributions included $192.7 million paid from five domestic estates in liquidation which were closed in 2012, plus $152.9 million in early access and interim distributions from an additional 15 domestic estates in liquidation.
But, through the years, under various agency heads and superintendents of insurance, there have been contentions of mismanagement, reorganizations, firings, sealed investigations and fumblings at the agency, which reports to the DFS but cannot be subpoenaed as a state agency.
Related story: The aborted New York Liquidation Bureau investigation
Historically, a portion of the NYLB employees have been represented by the Civil Service Employees Association (CSEA) but the NYLB is not part of the New York State Civil Service System.
As of Dec. 31, the NYLB had 252 employees, approximately half were represented by the CSEA. This is almost half of former high staffing numbers at a time when there was much concern about the inner dealings of the agency.
The NYLB carries out the duties of the superintendent of the Department of Financial Services (DFS) in his capacity as receiver of impaired or insolvent domestic insurance companies under New York Insurance Law Article 74.
The NYLB is responsible for managing the affairs of insurers that are financially impaired or insolvent.
Much of this was reported in earlier articles on the vast saga of ELNY, the failed and now insolvent Executive Life of New York insurer whose failure is leaving some hard-hit annuitants without full payment benefits.
When ELNY was taken over in 1991, it was a rehabilitation project, but a decade or more later, sank into insolvency. Some call the company's failure a regulatory problem because it got so much worse while parked at the NYLB. Some say it is a failure of a life insurer from loose industry investment practices of the late 1980s (junk bonds) that spurred subsequent reforms.
Some say state regulators stepped in to stop a run on the company. In early 1991, ELNY received considerable adverse publicity relating to the distressed asset portfolio of its parent company, California's Executive Life Insurance Company (ELIC.)
The insurance department saw that the publicity accelerated cash surrenders by policyholders, according to reports, accounts from the time and interviews. An order of rehabilitation was issued by the New York Supreme Court on April 23, 1991.
ELNY was licensed to write various lines of life insurance and annuities, including traditional life policies, single premium deferred annuities, single premium immediate annuities and closeout qualified retirement accounts.
After almost 10 years, with liabilities outstripping assets, Lawsky filed a court order on Sept. 1, 2011, seeking to convert the rehabilitation to a liquidation on the grounds that ELNY was insolvent and further efforts to rehabilitate the company were futile, the NYLB states in its report.
Lawsky also filed a restructuring agreement, which was negotiated with interested state guaranty associations, the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) and the life insurance industry for the purpose of maximizing benefits to ELNY policyholders and creditors, the report states.
ELNY was one of three rehabilitations targeted to close or convert to a liquidation in 2012. Only Frontier Insurance Co. was converted to a liquidation.
A petition to convert the rehabilitation to a liquidation for the other two, ELNY and Professional Liability Insurance Co. of America was filed.
