Bankruptcy of Insurance Brokers
Insurance brokers present a very unique problem. Insurance brokers or insurance sellers have often accumulated a number of residuals or renewals that have value. That is, they have a future interest in existing insurance policies, either through continuing premiums or upon renewal of the policy. This asset is unique in that it is tied to the insurance company that provided the policy and defined by the brokerage contract - and every brokerage contract is different.
When an insurance broker files a bankruptcy the question of how to protect the renewals and residuals takes center stage. If they are assets that belong to the debtor, then they must be protected. Otherwise they may be lost. This question raises numerous bankruptcy issues relating to the enforceability of the contract and the practical issue of whether a bankruptcy trustee can sell whatever residuals or renewals that have fallen into the bankruptcy estate.
Each case is different.