New York Federal Court Punts Request for Foreign Reinsurer to Post Security Back to Arbitrators
The Southern District of New York found that New York Insurance Law section 1213(c)(1), requiring that foreign insurers post sufficient security, applied to the defendant, a foreign reinsurer in liquidation, in order for the defendant to file its motion to dismiss and compel arbitration. The court rejected the defendant’s reliance on non-binding precedent in In re Laitasalo, “in which the court held that a group of foreign bankrupt insurance companies was not required to post security to defend against the claim of a state insurance commissioner … explain[ing] that the security would transform the commissioner’s unsecured claim into a secured claim to the detriment of the other U.S. creditors who are solvent or insolvent insurance companies.” 193 B.R. 187 (Bankr. S.D.N.Y. 1996).
The subject reinsurance agreements contained “broad arbitration clauses providing for arbitration for all disputes or differences between the Parties arising under or relating to” the reinsurance agreements. As the panel in a prior arbitration concerning these reinsurance agreements previously required the defendant to post an interim security, the court held that “the arbitration panel must decide in the first instance whether its prior orders — which were confirmed by this Court on April 24 — preclude” the instant motion for security.
In re Platinum-Beechwood Litig., No. 1:18-cv-06658 (S.D.N.Y. July 10, 2019).