EFTA Court Clarification on Insurance Claims

The insolvency proceedings regarding Gable Insurance AG in Konkurs, a Liechtenstein non-life insurance undertaking, constitute one of the largest and most complex insolvency proceedings with which the Liechtenstein courts have ever had to deal. The complexity of both the issues at hand and the European legislation which determines large parts of the legislative environment applicable to insurance undertakings led to the Princely Court of Liechtenstein filing a reference for a preliminary ruling from the EFTA Court, seeking clarification on the interpretation of Regulation 2009/138/EC (Solvency II). In particular, the definition of “insolvency claims” was uncertain yet essential in the insolvency proceedings in order to allocate the remaining funds accordingly.

Now a new hearing has been set for September 30th in which the insolvency administrator will prospectively declare acceptance or contestation with regard to a large portion of the claims filed and already examined. Whether the respective claims subject to acceptance will be recognized as insolvency or insurance claims will depend on their qualification in light of the EFTA Court decision handed down earlier this year. Regarding the definition of insurance claims, the EFTA Court has clarified that the insured event must have occurred before the cancellation of the respective insurance contract in order for a claim to qualify as an insurance claim under Art. 268 para. 1 lit. g Solvency II. Based on the above, the existence of an insurance contract is a prerequisite for qualification as an insurance claim. To the surprise of the insolvency administrator, the EFTA Court has concluded that claims for premium payments due to the cancellation of the contract in the course of the commencement of insolvency proceedings cannot be considered insolvency claims.

As a consequence, claims for premiums owed on account of the dissolution of the respective insurance contracts due to the opening of insolvency proceedings will be treated as 4th class insurance claims under the Liechtenstein Insolvency Act. Thus, such claims will be considered the lowest ranking claims in the proceedings and not preferential claims, diminishing if not extinguishing their chance of settlement.

We regularly advise creditors in insolvency proceedings and are happy to answer any questions arising in this context. For further information, please do not hesitate to contact Dr. Hannes Arnold, M.B.L.-HSG or Mag. Sophie Herdina.