Captive Insight Vol I | Page 38

CAPTIVEINSIGHT Q&A Reflections on this issue from Peter MacKay, Chairman, CEO and Director Global Captive Management Q) During your tenure as a leading insurance manager, how many captives have you worked with where the fronting company failed? A) There were about fifteen from the failure of fronting companies over the 31 years we have been in business. I still have one under management, which still writes business, whereby a former fronting company filed for liquidation and I just received a loss 38 run that showed five open claims, four of which are reserved at $1 and the final one reserved at $50,000 going back to 1984. We can’t commute the reserves or settle as the insureds are no longer in business and the fronting company doesn’t even know what the claims are. Q) How was the run off dealt with for those captives in terms of reserves, collateral, cash flow, and regulatory issues? A) The most important issue is to ensure that the funds held as collateral for the reserves is protected from being brought into the general assets of the liquidation. The State appointed liquidator may try and do that, but as long as it is in a 114 Trust there is abundant case law to protect the assets and make them specific for just the loss payments relating to the captive program. With a letter of