Arrowood Indemnity Company Enters Liquidation - Important Deadlines and Implications for Policyholders

| Legal Alert
John G. Koch

The Delaware Court of Chancery entered an order placing Arrowood into liquidation on November 8, 2023 and set the proof of claim deadline for January 15, 2025.

Arrowood was formed in 2006 to take on Royal Sun Alliance’s run-off insurance operations, much of which were saddled with legacy claims (environmental, asbestos, etc.), allowing Royal to rid itself of its legacy claims albatross. Not surprisingly, having been cut off from the financial backing of Royal but left with Royal’s troubled run-off business, Arrowood has run out of money.

As with other recent liquidations (e.g., Bedivere (OneBeacon)), this insolvency will disproportionately affect policyholders with long-tail environmental, asbestos or other legacy liabilities that purchased coverage from a Royal insurer prior to the mid-1980s, when pollution exclusions were narrower and before the advent of asbestos exclusions. In particular, any policyholder being defended or indemnified by Arrowood (based on an old Royal policy) pursuant to a cost-sharing agreement with multiple insurers can expect to be forced to revisit that agreement. For this reason and others, insolvencies such as this one tend to have a significant ripple effect across the long-tail or legacy claims landscape.

In addition to traditional long-tail claims such as environmental and asbestos, there are newer and emerging long-tail risks that may trigger old Royal policies, such as PFAS litigation and sex abuse claims. These emerging risks highlight the far ranging impact an insurer insolvency can have.

What should policyholders do? Among other things:

Flaster Greenberg has helped many policyholders reallocate coverage obligations to other solvent insurers after a liquidation, recover from state guaranty funds, and mitigate losses caused by an insurer insolvency. We would be pleased to assist you if the Arrowood liquidation may affect your company. 

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