Captives and Debtors

bankcruptcyInteresting news about OxyContin maker Purdue Pharma seeking product liability insurance and general liability coverage by creating a captive insurer.  Purdue asked for permission to set up the captive insurer in federal court on Monday as part of the firm’s filing for bankruptcy protection, as it has been challenging for them to find a commercial solution with a third-party insurer, not surprisingly.  Purdue faces more than 2,600 lawsuits alleging that it helped fuel the U.S. opioid epidemic.

As VCIA Member (and recipient of VCIA’s 2019 Industry Service Award!), Chaz Lavelle of Bingham Greenebaum Doll LLP stated recently in a September 17 article in Business Insurance,  “We’ve had situations in the past where an operating company has gone bankrupt but the captive insurer which it has previously set up was fully solvent, continued to operate and pay claims notwithstanding the bankruptcy and the disposition of the company.”

It reminded me of the Vermont captive for the bankrupt firm Enron back in the 90s. Even though the firm was mired in bankruptcy proceedings due to the fraudulent leadership at the top, under the supervision of Vermont’s Department of Financial Regulation its captive remained solvent and paid out every one of its claims under its policies in full. Having the captive kept the policy claims separate from the bankruptcy proceedings. Even debtors require various liability, casualty, property and other insurance programs in the ordinary course of their businesses.

Thank you all very much, and I look forward to hearing from you.

Rich Smith
VCIA President

May the FASB with you

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Look, the Empire of Accounting has many draconian rules and regulations, but if you are unprepared with Force of knowledge you will be thrust into the Dark Side of your ledger.

OK, enough with the Star Wars rip-off. The Financial Accounting Standard Board (FASB) has been busy at work issuing a variety of new standards. If you have investments, especially equity investments that have been accounted for through Other Comprehensive Income (OCI), you’re about to see a big change as a result of Accounting Standards Update (ASU) 2016-01, Financial Instruments Recognition and Measurement, ASU 2018-03, Improvements to Financial Instruments and ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement.

Hopefully you can join us on September 25th at 2:00 p.m. ET for a truly instructive webinar on these changes as we walk through a case study and discuss the impact of obtaining a permitted practice to not adopt these new standards. Additionally, we will provide an update on ASU 2016-13, Financial Instruments – Credit Losses and ASU 2016-02, Leases.

Our panelists will be Sandy D. Griffith, Senior Vice President at Advantage Insurance, and Magali Welch, Partner with Johnson Lambert LLP. Ably moderated by Steve Garwood, Vice President, Treasurer and CFO of EIIA, which is the parent company of two Vermont based captives, with expert content advice from Rebecca James, Principal at Johnson Lambert LLP.

After completing this webinar, you will be able to: cite changes related to accounting for financial instruments; adopt best practice methods for properly accounting for the change in guidance; and identify some impacts (potential and known) of obtaining a permitted practice to not account for this guidance.  Register now, and may the Force of accounting knowledge be with you!

Thank you all very much, and I look forward to hearing from you.