We write to provide an important update concerning Executive Life Insurance Company of New York (“ELNY”).
By way of background, pursuant to an April 23, 1991 court order, ELNY was placed into rehabilitation and the Superintendent of Insurance of the State of New York (“Superintendent”) was appointed as the rehabilitator. Rumors of a liquidation have been circulating since at least as early as 2006, when the Superintendent reported an approximate $600 million shortfall in funds needed to meet ELNY’s obligations, most of which arise from structured settlement annuities issued by ELNY. In December 2010, the Supreme Court of Nassau County, New York issued an Order to Show Cause giving the Superintendent until July 1, 2011 to confer with The Life Insurance Company Guaranty Corporation of New York (“LICGNY”) and other interested parties in order to develop and file an agreed liquidation plan. (The Order to Show Cause stated that, if an agreed liquidation plan could not be reached by July 1, then the Superintendent would have until Aug. 1 to apply for an order of liquidation.) The Superintendent subsequently requested several extensions of the July 1 deadline, and the deadline was ultimately extended until yesterday, Sept. 1.
Yesterday, the Superintendent filed a Petition for Order of Liquidation and Approval of Restructuring Agreement (“Petition”). The following are among the more noteworthy aspects of the Petition:
- The Superintendent states that it and the National Organization Of Life And Health Guaranty Associations (“NOLHGA”) have agreed to the terms of a restructuring agreement (“Restructuring Agreement”), the parties to which will also include participating state guaranty associations including LICGNY (“PGAs”). The Superintendent states that he anticipates that the PGAs will ratify the Restructuring Agreement by Oct. 1, and that thereafter, Schedule 1.15 to the Restructuring Agreement — which sets forth, inter alia, the ELNY estate assets to be allocated to, and the guaranty association contribution for, each annuity — will be submitted to the Court.
- The Superintendent states that, as of January 2012, it is expected that ELNY will have outstanding obligations to approximately 9,700 policyholders. The Superintendent asks for an order of liquidation on the grounds, among others, that ELNY is unable to meet its outstanding obligations due to what is now an approximate $1.6 billion shortfall, and that this shortfall is expected to worsen.
- The Superintendent asks that the Court approve the Restructuring Agreement on the grounds, among others, that it will result in greater payments to payees than would result under a statutory liquidation.
- The Superintendent states that ELNY’s assets will be able to cover only 34 percent of its remaining annuity obligations. However, the Superintendent states that, under the Restructuring Agreement, at least 79 percent of the outstanding ELNY annuity contracts (and perhaps as many as 84 percent) will be fully and timely paid, as a result in part of contributions from the PGAs. The remainder will have shortfalls, some of which will be substantial, and annuity owners will be exposed with respect to those shortfalls.
- The Superintendent asks that the Court approve the following briefing schedule: service of answering papers to the Petition by any interested party by Jan. 16, 2012; filing of reply papers by the Superintendent by March 1, 2012; and a return date on or about March 15, 2012 for a hearing on the Petition.
We will continue to keep you advised regarding ELNY developments.