California Insurance Commissioner John Garamendi announced that the Department’s Conservation and Liquidation Office will distribute a record $1.25 billion to claimants of failed insurance companies during 2006.
Notably, the policyholders of the former Executive Life Insurance Co. have received more than $377 million in 2006 in addition to previous distributions. Overall, the Commissioner has secured $1.1 billion on their behalf through litigation, including a lawsuit against the French consortium that fraudulently acquired ELIC’s successor. Another $700 million could be available to distribute to policyholders pending an appeals court ruling, the Commissioner’s office said.
The CLO is a service organization responsible for the rehabilitation and/or liquidation of the assets of financially troubled California insurance companies. Unlike other business entities, insurance companies are not allowed to file for formal bankruptcy. They are instead taken over by regulators and put into “conservation” to ensure that efforts are taken to fulfill outstanding claims.
Since 2003, CLO closed 33 failed insurance company estates through September 2006.
Other estates benefiting from this year’s distributions include:
• The Mission Insurance Group estate – $540 million was disbursed to its claimants in 2006. The Mission companies failed in 1987, representing at the time the largest failure of a property/casualty insurer in the nation.
• Fremont Indemnity Co. – $168 million was disbursed to policyholders this year. As recently as 2000 Fremont was the largest private underwriter of workers’ compensation insurance in California. It was conserved by the Department of Insurance in 2003.
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