Insurer's Voluntary Liquidation Denied

Through Resolutions 155/2024 of March 21, 2024, and 183/2024 of April 12, 2024, the Argentine Superintendence of Insurance (SSN) prohibited Boston Compañía Argentina de Seguros SA from disposing of its investments and from entering into new insurance contracts, respectively.
 

On July 2, 2024, the SSN issued Resolution 305/2024, prohibiting the insurer from:
 

1. performing administrative actions related to its properties, including entering into leases, loans, or any other contracts that could impact on the insurer’s finances,
2. carrying out acts concerning its reinsurance relationships.

The SSN considered that the insurer had:
 

1. delayed the registration of judicial proceedings in its books, effectively concealing liabilities,
2. set up reserves below the corresponding amounts and experienced delays in payments, indicating an undervaluation of liabilities,
3. categorized as investments a favorable judgment against the Ministry of Economy, claiming it held government securities when it only had an illiquid credit to receive payments in legal proceedings.

These issues raised concerns about the accuracy of the insurer's records and left the SSN unable to ascertain its true economic and financial condition.

On July 17, 2024, the insurer informed the SSN that the shareholders had resolved to voluntarily liquidate the company. The company asserted that voluntary liquidation was the most effective course of action to safeguard the rights of policyholders and of third parties, who would otherwise be impacted by forced liquidation. The insurer also highlighted that its favorable financial position enabled it to pursue voluntary liquidation.

On July 23, 2024, the SSN issued Resolution 335/2024, which
 

1. denied Boston's request for voluntary liquidation,
2. revoked the insurer's authorization to operate,
3. prohibited the company from performing any administrative actions regarding its assets, imposing a general asset inhibition.

In making this decision, the SSN quoted the serious irregularities outlined in the previous resolution, highlighting a complete lack of rigor in the insurer’s management, which compromised the integrity and reliability of its accounting.

This was not only an irregular exercise of the insurance business warranting the order for forced liquidation. It also rendered voluntary liquidation unfeasible. Voluntary liquidations are intended for companies that are serious, solvent, and capable of meeting their liabilities comprehensively and systematically. In this case, however, the severe irregularities uncovered made it impossible to accurately quantify the insurer’s liabilities or determine its position regarding the required technical ratios. This meant that any liquidation balance sheet would be purely speculative.

Insurer’s Appeal

Boston challenged Resolution 305/2024, arguing that:
 

1. its economic and financial situation had deteriorated due to its inability to operate as a result of the measures the SSN imposed,
2. the real relevant estate transactions had been conducted in compliance with the law,
3. the SSN had not considered the economic impact of the company's credit against the Ministry of Economy,
4. the decision to disregard this credit as an investment was arbitrary, only benefiting the Ministry of Economy, which was both the debtor of the credit and the governmental authority the SSN depended of. Since the SSN would carry out the forced liquidation, this could ultimately prejudice the insurer’s shareholders, its insureds, and third-party creditors.

Court Resolution

On December 20, 2024, in the case “Superintendencia de Seguros de la Nación c/ Boston Compañía Argentina de Seguros S.A. s/ Organismos Externos” (Docket 7961/2024), the National Court of Appeals in Commercial Matters upheld the resolution, stating—among other things—that:
 

1. the credit the insurer invoked was not liquid, which meant that the insurer did not have sufficient assets to meet its financial obligations,
2. the irregularities in its accounts made it impossible to trust that proper records would be maintained during a potential voluntary liquidation.

The court further stated that "It is true that when the insurer resolves its voluntary liquidation, the liquidation should be carried out by its statutory bodies—notwithstanding the supervision of the supervisory authority—, but this cannot be an impediment for the supervisory authority to request the competent judge to appoint it as liquidator, when the protection of the interests of the insureds requires it (art. 50. Law 20091), as happens in the present case."

However, the Court accepted the argument that there could be conflicting interests between the Ministry of Economy on the one hand and Boston, its shareholders, and creditors on the other, so it allowed Boston to request the judge in charge of the judicial liquidation of the company to appoint an ad hoc liquidator exclusively in charge of collecting the credit derived from the judgment against the Ministry.