Wisconsin Insurance Commissioner Theodore Nickel said he’s seeking permission from a state judge to begin making interim payments on more than $3 billion in claims made by clients of Ambac Assurance Corp.
Nickel’s office in 2010 undertook the rehabilitation of a segregated portfolio of Ambac policies insuring as much as $50 billion in mortgage-backed securities and other corporate liabilities.
Dane County Circuit Court Judge William Johnston in Madison last year approved a plan to pay some of those policy holders 25 percent of their claims in cash, with the balance deferred for nine years with interest.
“While the work on implementation of the plan continues, we are pleased to begin making interim payments to policyholders in the near-term, subject to the approval of the court,” Nickel said in a press statement yesterday.
The commissioner’s filing couldn’t immediately be confirmed by the Dane County Circuit Court clerk’s office in the state’s capital city, Madison.
Ambac Assurance, a unit of New York-based Ambac Financial Group Inc. (ABKFQ), was the second-biggest U.S. bond insurer before the 2008 financial crisis, after which mounting claims spurred by mortgage defaults swamped the company with claims and threatened its viability.
The insurer was paying out as much as $150 million a month, exceeding its revenue, Nickel’s predecessor, Sean Dilweg, had said.
Ambac Financial Group filed for bankruptcy court protection in 2010. U.S. Bankruptcy Judge Shelley Chapman in March granted final approval to the parent company’s reorganization of $1.7 billion in debt, under which its own shareholders receive nothing.
Both Ambac Financial and Ambac Assurance have yet to receive final court approval of the resolution of a dispute with the U.S. Internal Revenue Service over the companies’ $708 million tax refund claim.
The Wisconsin rehabilitation plan too is awaiting resolution of tax issues relating to the issuance of the notes and is not yet effective, Nickel said yesterday.
The case is In re The Rehabilitation of Segregated Account of Ambac Assurance Corp., 2010-cv-001576, Dane County, Wisconsin, Circuit Court (Madison).
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