A group of local and international insurers will pay $48 million following settlement of the Wingecarribee class action against failed US investment bank Lehman Brothers.

Creditors are expected to get more than 50 cents in the dollar from the first quarter of next year, with the insurance settlement paving the way for further distributions.

The action was started by a group of councils, including Wingecarribee Shire Council in NSW, following the collapse of Lehman Brothers.

The councils claimed compensation for losses suffered when they were sold collateralised debt obligations (CDOs) that plummeted in value during the global financial crisis.

A group of 90 councils, churches and charities has a separate $200 million action against Standard & Poor’s over ratings it gave the CDOs.

Lehman Brothers Australia liquidators Stephen Parbery and Marcus Ayres of PPB Advisory say total recoveries are likely to top $550 million.

Mr Ayres says securing the insurance settlement was a critical first step. “Since our appointment we have fought hard to protect this asset for the benefit of all creditors, but it was one of the key reasons holding us back from finalising other matters.”

The Federal Court has to approve the settlement.