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Executive Life Insurance Company (ELIC) was once the largest life insurance company in California. Its financial problems and subsequent insolvency in April 1991 [1] shocked its policyholders and the financial world.

At the time, First Executive was the biggest insurer ever to fail, which resulted primarily from money-losing investments in junk bonds. First Executive through Fred Carr had a strong association with Mike Milken and the brokerage firm Drexel Burnham Lambert, whereby at the end of 1990 the company owned high-yield debt, much of it issued through Drexel, with a carrying value of $9 billion.[2] According to Robert Sobel, First Executive was involved in 90% of Drexel's underwritings, which accounted for about $40 billion in bonds from 1982 to 1987.

After the State of California took over Executive Life, it sold the company's junk-bond portfolio to Altus Finance, a unit of Crédit Lyonnais, in November 1991 for $3.25 billion. Because banks were prohibited under the Glass–Steagall Act from owning insurance companies, Crédit Lyonnais organized an investor group to buy the insurance company operations, with the new company named Aurora National Life Assurance Co. Majority control of Aurora National was sold to Groupe Artémis in 1994.[3] In July 1998, an anonymous French whistle-blower told the California Insurance Department that Crédit Lyonnais was the real buyer of the insurance company and controlled it through secret agreements. In early 1999, the California Insurance Department sued the bank and other parties, alleging fraud and seeking $2 billion in restitution.[4]

Notwithstanding that California law forbids a foreign-owned insurance company from owning insurers in California, despite court records and documents, Insurance Commissioner Garamendi says he was "unaware" a foreign government's bank was buying the bonds for pennies on the dollar.[citation needed]

In 2003, Crédit Lyonnais and others agreed to pay $771 million in settlements resulting from false statements to bank regulators in connection with the acquisition of junk bonds and the insurance business of the failed Executive Life Insurance Company of California.[5]

In 2001, Swiss Re took control of the Aurora National Life policies; Swiss Re fully acquired Aurora National Life in 2012.[6][7] In 2014, Aurora National Life was sold to Reinsurance Group of America[8]

A subsidiary, Executive Life Insurance Company of New York (ELNY), was seized by the state of New York, who sold the majority of the business to MetLife, retaining the structured settlement book of business. Due to mismanagement, ELNY was ordered to liquidate.[9] Guaranty Association Benefits Company took over the assets of ELNY in 2013.


  1. ^ Executive Life Insurance Company, Insolvencies and Impairments, NOLHGA website
  2. ^ Loomis, Carol J. (May 6, 1991). "What Fred Carr's Fall Means to You". Money (New York). 
  3. ^ "The French Connection - Forbes". Retrieved 2015-01-05. 
  4. ^ Rossant, John (July 29, 2001). "The Sword over Lyonnais". BusinessWeek (New York). 
  5. ^ "Credit Lyonnais and Others to Plead Guilty and Pay $771 Million in Executive Life Affair" (Press release). Washington, D.C.: United States Department of Justice. December 18, 2003. Retrieved 2013-11-24. 
  6. ^ "Swiss Re Affiliate Acquires Policies Of Executive Life Successor". LifeHealthPro. Retrieved 2015-01-05. 
  7. ^ "Aurora National Life deal closed in August". Retrieved 2015-01-05. 
  8. ^ "Reinsurance Group buying Aurora National Life : Business". Retrieved 2015-01-05. 
  9. ^ Coffin, Bill; Festa, Elizabeth; Hersch, Warren S.; Stanley, Michael; Moynihan, Shawn (November 2012). "The Complete ELNY Saga". National Underwriter Life & Health (Centennial, Colorado: Summit Business Media). Retrieved November 24, 2013. 

External links[edit]

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44 news items

Insurance News Net
Thu, 09 Apr 2015 10:15:00 -0700

... including the reduced payment obligations of Guaranty Association Benefits Company , a not-for-profit captive insurance company formed for making payments to the payees and certificate holders of the liquidated Executive Life Insurance Company of ...


Fri, 28 Nov 2014 07:56:15 -0800

And after the Executive Life Insurance Company of New York was declared insolvent in 2012, the fund was soon on track to soon be tapped out. The new law, which took effect immediately as Cuomo signed it, removes the cap altogether, putting New York's ...

The Journal News | LoHud.com

The Journal News | LoHud.com
Mon, 01 Dec 2014 18:48:45 -0800

After the Executive Life Insurance Company of New York was declared insolvent in 2012, the fund was soon on track to soon be tapped out. The new law, which took effect immediately as Cuomo signed it, removes the cap altogether, putting New York's ...
Mondaq News Alerts (registration)
Wed, 27 Mar 2013 09:53:19 -0700

The long ELNY saga continues, at least for the time being, with two recent developments. First, in a decision dated February 6, 2013, the Supreme Court of the State of New York, Appellate Division found that ELNY payees who had appealed the trial court ...
Long Island Business News
Mon, 16 Apr 2012 12:00:07 -0700

A Nassau County judge has declared the long-struggling Executive Life Insurance Co. of New York insolvent, changing the drawn out rehabilitation into a liquidation proceeding. In his ruling issued today, Nassau Supreme Court Justice John Galasso ...
Mondaq News Alerts (registration)
Thu, 08 Sep 2011 08:26:38 -0700

We write to provide an important update concerning Executive Life Insurance Company of New York ("ELNY"). By way of background, pursuant to an April 23, 1991 court order, ELNY was placed into rehabilitation and the Superintendent of Insurance of the ...
Dallas Morning News (blog)
Sun, 26 Oct 2014 12:41:26 -0700

Fortunately I never placed any Executive Life Insurance Company or Executive Life Insurance Company of New York business, structured settlements or life insurance. With due respect and empathy towards the affected, I have made it my business to study ...

Legal Broadcast Network (blog)

Legal Broadcast Network (blog)
Thu, 18 Dec 2014 06:31:14 -0800

The demise of Executive Life Insurance Company of New York (ELNY) and subsequent related litigation provide several lessons, perhaps most importantly that plaintiffs in structured settlement transactions need to have their own brokers. That takeaway ...

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