Claims:

Creditor/Policy Holder Recovery Services- Insolvent Insurers

Contact Information

For more information, please contact:

Katie McNally

Ross Mishkin

Michelle Uddin

When working with large commercial insurers that are distressed or in formal liquidation proceedings, the claims valuation process can become even more complex, taking years to complete and yielding uncertain final recoveries.

Some of these insurers, such as The Home Insurance Company, Kemper, Highlands and certain London Market Insurers, have become more active in negotiating claim values and have moved towards payment distributions to policyholder creditors.

However, many policyholders have submitted claims often at the claims-bar date, and have yet to agree on a claim valuation. Other policyholders have an agreed-claim value, but have yet to receive any distribution, effectively stranding the asset and locking up cash.

In the past several years, a secondary market has developed for purchasing-agreed claims, and to a lesser degree, unresolved claims.

  • These sophisticated buyers, often hedge funds, are willing to wait for payouts and arrange financing appropriate with this approach (unlike corporations that have opportunity cost of funds)
  • Buyers closely track the liquidations and know the regulatory process intimately. They are knowledgeable about the process, including general and specific recovery prospects for all major liquidations

Realizing Claim Value with Insurers in Liquidation 

If the claim is not agreed, policyholders with claims against insolvent insurer coverage should evaluate and present the claim to ensure they get the maximum agreed value:

  • Present claim considering all appropriate risk/claim categories including IBNR and reasonable worst-case scenarios
  • Negotiate to achieve the maximum agreed value given claim uncertainty and legal considerations

If the claim is already agreed, policyholders should understand their claims-trading options, and, if appropriate, develop a strategy to maximize the recovery on agreed claims:

  • Value of potential and likely recovery ranges and timing and resulting current value of claim, given time value of money
  • Determination of best available “Market Price” from buyers, not just unsolicited quotes
  • Transaction with buyers, where appropriate

The Claro Group Process

For claims not agreed between the policyholder and insurer:

  • Phase I – Evaluate underlying valuation drivers, such as coverage, claims and allocation, and develop valuation metrics
  • Phase II – Contact insurers and proceed with claims negotiations. Where appropriate, agree to a claim value
  • Phase III – Contact buyer, obtain pricing and determine optimum combination of transactions and/or other strategies given time value of money, risk and other similar factors (SEE BELOW)

For unpaid agreed claims between the policyholder and insurer:

  • Phase I – Develop detailed perspective on value of claims and package for presentation to prospective buyers. Internally determine lowest “sell” price for portfolio and/or individual claim
  • Phase II – Contact buyers, obtain pricing and determine optimum combination of transactions and/or other strategies given time value of money, risk and other similar factors

Benefits of The Claro Group Process

For claims not agreed between the policyholder and insurer:

  • Ensures that the policyholder presents a comprehensive claim considering all risk factors to achieve the maximum supportable agreed value
  • Leverages Claro’s deep claims negotiation experience and insurer relationships
  • Even small claims may be submitted efficiently and economically
  • Preserves policyholders place in line once the insurer begins paying claims
  • Allows client to keep legal/risk management personnel focused on active insurers and current business

For unpaid agreed claims between the policyholder and insurer:

  • Ensures optimal economic strategy is employed for resolution and payment of agreed claims
  • Levels playing field between sophisticated full-time buyers and one-off sellers
  • Applies leverage with multiple bidders and Claro’s understanding of the insurer’s financial position to achieve highest market price available

Claro’s Approach is a Win-Win Value Proposition:

  • Client has ultimate say in whether or not to accept proposed settlement offers and terms
  • Low risk strategy to monetize highly uncertain assets
  • Claro’s compensation often is typically tied to the incremental value we create for our clients
Contact Information

For more information, please contact:

Katie McNally

Ross Mishkin

Michelle Uddin