A 2019 New York state law that extended the statute of limitations for victims of childhood sexual abuse has brought down a half-century old Bermuda insurer, Offshore Alert has reported.

The new law extended to 55 years the statute of limitations for victims of childhood sexual abuse to bring civil lawsuits against their abusers and institutions.

It has meant that a 50-year-old Bermuda insurer, Northeast Insurance Co Ltd, has gone into liquidation as a result of “unforeseeable” multimillion-dollar claims.

After the law was introduced, 55 claims were brought in New York against defendants insured by the company, the publication has reported.

Offshore Alert said that the number of claims was stated in a Chapter 15 petition for recognition of Northeast’s Bermuda insolvency proceedings that its joint provisional liquidators filed at a federal bankruptcy court in New York.

Northeast, a Class 2 Bermuda insurer, which opened in 1975 and was owned by five non-profit institutions associated with the United Jewish Appeal and Federation of Jewish Philanthropies of New York, petitioned the Bermuda Supreme Court to be wound up earlier this month.

The company told the Bermuda court that in 2017, it decided to cease underwriting new risks and to enter a process of running off its existing liabilities.

The company was party to a number of claims brought against alleged perpetrators, and by the end of June, was aware of more than 30 such claims under the new Act.

But in August, there were some 23 further claims arising under policies fronted by various insurers. The unexpected exposure to claims necessitated a materially higher loss-reserve provision than previously reflected in its audited financial statements.

“The CVA claims were unforeseeable at the time of cessation of writing new policies and, therefore, no corresponding reserves were funded at that time,” it was stated. “The debtor has determined that the liabilities associated with the CVA claims likely exceed the debtor’s assets. Accordingly, the Bermuda proceeding was commenced to benefit from the mandatory stay of proceedings provided under Bermuda law and enable the debtor to preserve its assets for the benefit of creditors as a whole.”

The insurer filed a petition to wind up its affairs at the Bermuda Supreme Court on October 7, with Michael Morrison and Mark Allitt of Teneo appointed as Joint Provisional Liquidators two days later, the Chapter 15 petition stated.

In the Bermuda winding-up petition that was attached to the American filing, it was stated that: “Under New York state law, these cases are allocated over the years that the abuse is alleged to happen, as opposed to one single year. This horizontal application of the CVA claims over a multiyear period has had a significant impact on the company’s financial position and the unexpected exposure to claims has necessitated a materially higher loss-reserve provision than that previously reflected in its most recent audited financial statements.

“Due to the additional, unanticipated exposure, the company’s outstanding losses and loss expense reserves increased from $15.649 million to $29.068 million. As a result, the company’s board of directors has determined that the company is insolvent on both a cashflow and balance-sheet basis. The company will not be able to pay the losses implied in the reserves. The board considers that, as matters stand, absent the intervention of this court and the appointment of JPLs, the company will be unable to raise sufficient funds to meet all of the anticipated settlement payments in respect of the CVA claims.”

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