By Nick Brown
NEW YORK (Reuters) - A New York judge on Monday approved a plan to liquidate the long-insolvent Executive Life Insurance Co of New York and pay out most of the money owed to beneficiaries under the company's life insurance policies.
The plan proposed by Benjamin Lawsky, New York's superintendent of financial services, would pay out the remainder of about $900 million in Executive Life's estate, as well as another $730 million in contributions from state life insurance guaranty associations. Insurers also agreed to chip in about $70 million.
Lawsky's plan won approval by Nassau County Supreme Court Justice John Galasso, over the objection of a variety of Executive Life payees.
Galasso said it would allow for about 85 percent of the roughly 10,000 payees to receive full payouts on the present value of their annuity benefits.
"The court cannot apologize for applying the law as it pertains to everyone involved," Galasso wrote. "Their individual, understandable frustrations cannot be resolved in this proceeding."
Lawsky's office could not immediately be reached for comment.
Beneficiaries whose claims are larger than maximum recovery rates in certain states may still be under water.
Those people will be able to apply for additional reimbursement from a $100 million "hardship fund" paid for by members of the life insurance industry, James Wrynn, who had been New York's insurance superintendent at the time, said in September.
"Simply put, Executive Life does not have enough assets to meet all its obligations," Wrynn said at the time. "We have devised a plan that will maximize payments and ensure the fairest possible outcome for everyone."
New York's insurance and banking departments merged in October into the Department of Financial Services, which Lawsky oversees.
Executive Life was seized by New York insurance regulators in 1991, a casualty of the recent junk bond market crash. Its California-based parent filed for bankruptcy protection the same year.
The insurer initially was to be rehabilitated, with policyholders receiving full payouts over time.
But the recent economic downturn led regulators to scrap the rehabilitation plan.
Galasso said the liquidation plan that replaced it was the best possible outcome for policyholders, but acknowledged some of them will still have to cope with a "diminished financial future".
The case is In re: Rehabilitation of Executive Life Insurance Co of New York, New York State Supreme Court, Nassau County, No. 8023/1991.
(Editing by Dale Hudson)