Firm’s Liquidation Plan Approved by Bankruptcy Attorneys

As the cases surrounding Executive Life Insurance Co. has been dragging for ages, Bankruptcy Attorneys are proud to say that the wait is finally over.

Finally, payees will be able to sit back and rejoice, as their investments (though not in full amounts), would be remitted through a plan initiated by Benjamin Lawsky, New York’s superintendent of financial services. The plan would start with the payout of $900 million in Executive Life’s estate, as well as another $730 million in contributions from state life insurance guaranty associations.

According to a Bankruptcy Attorney, the plan won approval by Nassau County Supreme Court Justice John Galasso, over the objection of a variety of Executive Life payees.

Galasso said it would allow for about 85 percent of the roughly 10,000 payees to receive full payouts on the present value of their annuity benefits.

“While some 15 percent cried in outrage”, said of the Bankruptcy Attorney, “The court cannot apologize for applying the law as it pertains to everyone involved.” With it being reeked of utilitarian principles, the public cannot but wonder that the majority will always win in these situations.

“Simply put, Executive Life does not have enough assets to meet all its obligations,” James Wrynn, the previous New York Insurance superintendent, said at the time. “We have devised a plan that will maximize payments and ensure the fairest possible outcome for everyone.”

History of Problems

New York’s insurance and banking departments merged in October into the Department of Financial Services, under which Lawsky oversees.

Executive Life was seized by New York insurance regulators in 1991, a casualty of the recent junk bond market crash. Its California-based parent filed for bankruptcy protection the same year.

The insurer initially was to be rehabilitated, with policyholders receiving full payouts over time.

“But, the recent economic downturn led regulators to scrap the rehabilitation plan as dollar value led to surprisingly low with rising borrowing costs,” says of a Bankruptcy Attorney.

Galasso said the liquidation plan that replaced it was the best possible outcome for policyholders, but acknowledged some of them will still have to cope with a “diminished financial future”.

Bankruptcy Attorneys are hoping to make ends meet for parties, insurer and payee alike. Finding possible ways to fix the situation as well as reimburse payee investors. But, with the limit on the amount of finance the company has, some payees would therefore have to wait until the situation is neutralized.