On April 17, 2012, the Superior Court of Rhode Island (the “Court”) entered an Order in the matter captioned In re: GTE REinsurance Company Limited, C.A. No. PB 10-3777 terminating the GTE REinsurance Company Limited (“GTE RE”) Commutation Plan Action. The matter, which was the first accelerated closure of liabilities for a solvent US property and casualty insurer or reinsurer, is now concluded.
The April 17, 2012 Order followed an earlier, March 23 2012, Order in which the Court had indicated, in part, that:
1. GTE RE has complied with all aspects of the [Court’s February 1, 2012 Amended]
Implementation Order;
2. GTE RE has paid all claims that were properly and timely submitted;
3. GTE RE has completed the Commutation Plan and the Commutation Plan is hereby terminated; and
4. GTE RE is discharged from all obligations to all creditors as set forth more completely in paragraphs 6 and 8 to the Implementation Order.
GTE RE, a former Bermuda domiciled captive insurer owned originally by GTE Corp. and now owned ultimately by Verizon Communications Inc., underwrote non-related third party assumed reinsurance from 1978 to 1989, together with its owner related risks. The third party assumed reinsurance was written to insurers and reinsurers throughout the world and covered, principally, property, catastrophe, and casualty risks including reinsurance of asbestos, pollution, health hazard and workers compensation risks.
GTE RE went into run off in 1990 and moved its domicile to Vermont in 1994. In June 2010 GTE RE transferred its owner related risks to an affiliated captive reinsurer and, containing only the non-related assumed reinsurance risks, moved its domicile to Rhode Island. Upon entering Rhode Island, GTE RE filed, and the Rhode Island Department of Business Regulation approved, a Commutation Plan pursuant to Rhode Island Chapter 27-14.5 entitled “Voluntary Restructuring of Solvent Insurers.”
GTE RE sent notice of its Commutation Plan to all of its reinsurance creditors and at the November 30, 2010 Meeting of Creditors, the Commutation Plan was approved by Creditors representing in excess of eighty seven percent (87%) by number and ninety seven percent (97%) by value of those present and voting.
A subsequent challenge to the constitutionality of the Rhode Island statute, filed by two creditors, was rejected by the Court and the Commutation Plan was implemented.
Through its implementation of the Commutation Plan, GTE RE honored its outstanding obligations and paid all creditors, who submitted proper and timely Claim Forms, one hundred percent of the agreed value for their claims. Consequently, GTE RE was able to terminate its run off in early 2012, less than two years after it began the Commutation Plan process, rather than face the cost and distraction of a prolonged – perhaps twenty five year – continued run off operation.
Copies of the revised April 25 Court Decision Approving the implementation of the GTE RE Commutation Plan , the April 27 Implementation Order and the March 23, 2012 Order are available below.
Andrew Rothseid, principal of RunOff Re.Solve LLC, served as Commutation Plan Advisor for GTE RE.