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