The New York Liquidation Bureau has completed a plan that could lead to payment reductions for about 16% of the consumers who are getting payments linked to Executive Life Insurance Company of New York.
Executive Life of New York, Jericho, N.Y., entered rehabilitation in 1991 when its parent — Executive Life Insurance Company, Los Angeles – folded.
The Executive Life of New York estate has been responsible for making annual payments to individuals receiving benefits from structured settlements obtained through litigation. In 2007, New York state officials reported that the estate had started suffering from a noticeable shortfall in income around 2002.
Benjamin Lawsky, superintendent of the New York State Department of Financial Services, and James Wrynn, the court-appointed receiver for Executive Life, say the bureau now has filed legal papers that could lead to the liquidation of Executive Life of New York.
The proposed liquidation plan includes a restructuring agreement filed with a state court in Nassau County, N.Y. The restructuring agreement includes the following assets:
- Executive Life of New York’s assets, which amount to about $900 million.
- About $730 million in contributions from state life insurance guaranty associations.
- About $40 million from life insurance companies for enhanced benefits for contract owners, payees and beneficiaries who are not covered by any state guaranty association, to provide coverage for up to $100,000 in enhanced benefits.
- About $25 million from life insurance companies for a further “top-up” benefit to increase the coverage up to $250,000 for beneficiaries who are not covered by any state guaranty association, or whose maximum state guaranty association coverage is below $250,000.
Liquidation plan provisions that fall outside the restructuring agreement include:
- A hardship fund: The life insurance industry has voluntarily agreed to contribute about $100 million to provide supplements for consumers whose payments may have to be reduced.
- Potential additional benefits from some of owners of the contracts, including property-casualty insurers that bought the structured settlements from Executive Life and which may remain obligated for portions of the payments.
The liquidation plan would double the amount of assets Executive Life of New York has available to protect the recipients of benefits payments, officials say.
Lawsky says in a statement that regulators worked with the guaranty associations and the life insurance industry to make the best of a challenging situation.
“Executive Life does not have enough assets to meet all its obligations, a fact made far worse by the recent financial crisis,” Lawsky says.