Strohm Ballweg in Madison, Wisconsin focuses solely on providing insurance clients with exceptional and personal service including insurance company liquidation. Our highly experienced staff is very knowledgeable about the insurance industry.
The law classifies liquidations into two types: voluntary or compulsory. Voluntary liquidation refers to the process whereby the shareholders appoint a liquidator, who is then answerable to the creditors or shareholders. Voluntary liquidation may be in one of two forms, depending on whether or not the company is solvent. If the company is solvent the shareholders can supervise the liquidation. If is not, the creditors may take control of the liquidation process by applying to the court. Compulsory liquidation of a company requires a court order. This process starts with an application to the court alleging that one or more of the required grounds for liquidation exist.
Insurance insolvency is like a bankruptcy; however, federal bankruptcy laws do not apply to insurance companies. Broadly speaking, a court determines whether an insurance company is able to meet its ongoing obligations. If it is not, it is placed in liquidation, meaning a receiver or liquidator is appointed to liquidate the company and settle its affairs. One of the primary objectives of insurance regulators is to identify, as early as possible, insurance companies that are showing signs of becoming financially troubled so corrective action can be taken to protect policyholders, claimants and creditors from financial loss. A troubled insurance company is generally defined as a company that either is in or is moving toward a financial position that subjects its policyholders, claimants and other creditors to greater-than-normal financial risk.
When an insurance company enters a period of financial difficulty and is unable to meet its obligations, the insurance commissioner in the company’s home state initiates a process, dictated by the laws of state, whereby efforts are made to help the company regain its financial footing. This period is known as rehabilitation. If it is determined that the company cannot be rehabilitated, the company is declared insolvent and the commissioner will ask the state court to order the liquidation of the company.
In April 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. This pronouncement provides guidance on when and how an entity should prepare its financial statements using the liquidation basis of accounting and describes the related, necessary disclosures that should be made. Entities must prepare financial statements using liquidation basis of accounting to present relevant information about the expected resources in liquidation. Strohm Ballweg knows that liquidation basis of accounting should be applied once the liquidation becomes imminent. Liquidation is imminent when the likelihood is remote that the company will return from liquidation and either a plan for liquidation is approved by the person with the authority to make such a plan effective or a plan for liquidation is imposed by other forces, for example, involuntary bankruptcy.
On December 1, 2006, Mark Femal began work as Projects Manager/Director of Strohm Ballweg. Mark assisted on closing the American Star Insurance Company in liquidation. Representing the National Organization of Life and Health Guaranty Associations (NOLHGA), he is currently working on six health and life rehabilitations and liquidations. Typically, Mark works on the financial and claims portions of the liquidations. Additionally, he serves as project manager on two of the liquidations.
Strohm Ballweg has an exceptional ability to provide quality insurance accounting and is highly qualified for working on insurance company liquidation. For more information about our firm, click on www.strohmballweg.com