New Zealand-based insurer CBL Insurance will not make further payments to policyholders with open claims, court-appointed interim liquidator Kare Johnstone says.

The move affects builders’ warranty policyholders and holders of surety and financial risk bonds. Clients with direct insurance policies including professional indemnity, public liability, and employees’ and officers’ covers, are also affected.

“At this time, based on preliminary financial information… there may be insufficient funds available to meet in full any claims made under policies and bonds issued by [CBL Insurance],” Ms Johnstone says in a circular to policyholders and claimants.

“As is the position with open claims, any costs incurred by claimants that may normally be claimable under their policies and for which the policies may be liable will be entitled to rank as unsecured creditor claims should CBL Insurance go into liquidation.”

Clients and policyholders should seek professional advice on whether they need to purchase new cover, the circular says.

CBL’s future is in doubt after it was placed into interim liquidation by the New Zealand High Court and the company chose to enter voluntary administration. The Reserve Bank of New Zealand asked the court to appoint interim liquidators after CBL made a $NZ55 million ($51 million) payment to overseas entities, in breach of regulations.

“CBL Insurance had recently confirmed to the reserve bank that it was continuing to operate despite being below the minimum regulatory solvency level,” the regulator says. “The payments to overseas companies were made in the context of significant doubts about CBL Insurance’s solvency.”

The insurer’s European business has also run into regulatory trouble, with the Central Bank of Ireland securing court approval to have CBL Insurance Europe (CBLIE) placed in provisional administration.

“The central bank has made this application because it has formed the view that CBLIE is in breach of a number of regulatory requirements and is in a distressed financial position,” the bank says.

“In the absence of taking this action, it is the central bank’s view that there could be a disorderly failure of CBLIE.”

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