Ronald S. Gass
Reinsurance and Insurance Arbitrator and Umpire
Reinsurance and Insurance Dispute Resolution Services Consultant

Life Reinsurance Agreement Not Executory as to Claims Presented by Insolvent's Policyholders Still Living as of Liquidation Date

In a decision involving an insolvent Illinois life insurer, the Appellate Court of Illinois held that a life reinsurer's obligations under a segregated asset portfolio agreement were not executory as to claims presented by policyholders still living as of the liquidation date. In affirming the trial court's ruling in the liquidator's favor, the appellate court agreed that the obligations of the insolvent insurer to this class of policyholders were not so far unperformed that the failure of either to complete performance would constitute a material breach excusing performance to the other. Because the insurer paid, and the reinsurer continued to accept, ceded premiums under the reinsurance agreement prior to the insolvency, notwithstanding the insolvent's failure to maintain and account for the portfolio of assets properly, the reinsurer had waived this defense and was still obligated to pay the claims of this class of policyholders for the net present value of their policies as of the liquidation date.

In re Liquidation of Inter-American Insurance Company of Illinois, No. 1-00-3340, 2002 Ill. App. LEXIS 232 (Mar. 29, 2002).

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