Can the liquidator of an insurer avoid the requirement to
forward reinsurance payouts to the parties it has insured?
A recent NSW Supreme Court decision (re HIH Insurance
Limited [2008] NSWSC 9) raises this tantalising
possibility - but leaves some vital issues hanging in the
air.
Background
HIH took out reinsurance as agent for its subsidiary
insurance companies. The premiums were paid by two of those
subsidiaries.
The HIH group went into liquidation. Under the terms of the
reinsurance contract, there was a deadline by which HIH had to
give notice if it wanted to commute the contract.
No notice was given by the deadline. Nevertheless,
HIH's liquidators and the reinsurer negotiated a
termination of the reinsurance. Under the termination
agreement, the reinsurer would pay a large sum of money to HIH
(in settlement of "all existing and potential
claims").
