The Wisconsin insurance commissioner’s plan to “rehabilitate” a segregated $50 billion portfolio of Ambac Assurance Corp. policies and corporate liabilities was upheld on appeal.
Wisconsin’s intermediate-level Court of Appeals today upheld the January 2011 decision by state Circuit Court Judge William D. Johnston to approve the plan and subsequent rulings.
“The interested parties have the burden of challenging specific findings of fact and conclusions of law,” Judge Paul B. Higginbotham wrote for a three-judge panel. “The interested parties have failed to meet their burden in this case.”
Ambac Assurance, a unit of New York-based Ambac Financial Group Inc. (AMBC), was the second-largest U.S. bond insurer before the 2008 financial crisis. Mounting defaults in mortgages underlying the securities swamped the company with claims, threatening its viability.
The insurer was paying as much as $150 million a month in claims, exceeding its revenue, Sean Dilweg, then the state’s insurance commissioner, said in a 2010 interview.
Under Dilweg’s plan, the 1,000 of Ambac’s 15,000 policies that posed the greatest threat to its financial stability were placed in the segregated account, according to the appeals court ruling.
Under the plan approved by Johnston after a five-day evidentiary hearing in November 2010 and upheld today, holders of claims associated with that account will be paid 25 percent of those claims in cash and the remainder in surplus notes that mature in 2020.
“Some time before the maturity date, the commissioner will assess the need to modify that date to allow for the continuation or reissuance of surplus notes after 2020,” according to the appellate ruling. “It is projected that the surplus notes may not be paid until 2050, if not later.”
Tom Becker, a spokesman for the commissioner with Sitrick & Co., declined to immediately comment on today’s ruling.
The case is In the Matter of the Rehabilitation of: Segregated Account of Ambac Assurance Corp., 2010AP1291, 2010AP2022, 2010AP2838 and 2011AP561, Wisconsin Court of Appeals, District IV (Madison).
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