Big insurance company loss looming

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Liquidators of Queens-town’s failed Western Pacific Insurance have released initial figures with the makings of a $5 million deficit. 

Appointed on April 1, liquidators Simon Thorn and David Ruscoe have filed their first liquidators’ report from “information provided by directors and employees”. 

Known debts are $5.876 m and known assets just $957,192. Unsecured cred-itors are whistling for $3.9m, policyholders have unsettled claims of $1.9m and employ-ees are owed wages of $41,522. 

An accountant also tells Mountain Scene that all 7000 Western Pacific policyholders are unsecured creditors owed refunds for the outstanding balance of their premium years. 

In assets, Western Pacific has $200,000 in the bank, $257,000 held by a Singapore reinsurance broker, and $500,000 worth of New Zealand government bonds, which all insurers are required to hold as safety nets. 

It’s early days, Thorn and Ruscoe warn, so they’re telling creditors: “At this stage, it’s not possible to give any indication of the likely outcome of the liquidation.” 

That’s because the liquidators tag several large financial items as “estimate realisation unknown”. 

First, Western Pacific’s broker network is hanging on to $2.6m of unforwarded premiums. 

Mountain Scene wanted to ask the liquidators whether brokers had been withholding client premiums because of rumours of Western Pacific’s demise – and how realistic it was to expect premiums to be handed over now the insurer has gone bust. 

However, despite 24 hours notice of these and other questions, Thorn and Ruscoe failed to answer by page deadline. 

Other large items of “unknown” value are “investments” – in the books at $560,332 – and cars, office furniture and IT equipment put at $458,000. 

The liquidators say they’ll also try to claw back “unknown” sums from reinsurers “to meet the many [earthquake] claims yet to be assessed and determined”. 

These claims are believed to be in addition to the current $1.9m of unpaid Christchurch claims. 

The 14 reinsurers the liquidators hope to tap for funds are all foreign – six are Lloyds of London syndicates, with others from India, Malaysia, Barbados, Singapore, Sweden and France. 

The liquidators have presumably tagged reinsurance income as “unknown” because of the expense and difficulty of mounting foreign lawsuits if reinsurers resist payment. 

Western Pacific chairman and shareholder Graham Smolenski sounded just such a warning to Mountain Scene last week: “The second [Christchurch earthquake] had huge implications for us with reinsurance and there’s going to be a sea of litigation for years.” 

Reinsurance money aside, Thorn and Ruscoe pin their highest hopes on flogging off Western Pacific’s “ongoing insurance business”, saying this will determine “the ultimate value outcome of the company’s assets”. 

The approximately 180 unsecured creditors involve 12 from Queenstown, in-cluding GL Smolenski Investments Ltd for an unknown sum.