The liquidation today of a huge New York insurer will completely wipe out the state's $663 million insurance fund — plus force benefit cuts to 1,500 policyholders, The Post has learned.
The final dissolution of Executive Life Insurance New York, which is expected to be announced today by state regulator Benjamin Lawsky, will result in cuts of 30 to 60 percent for those policyholders.
It is the first time in memory a state insurance company has been liquidated and all policies were not paid in full.
The insurance fund pays in full policies up to $500,000 and annuities up to $1 million.
Roughly 10,000 ELINY policyholders will be paid in full.
The 1,500 who are expected to see benefits cut are due payouts above the limits.
ELINY has roughly $2.4 billion in liabilities and $905 million in assets, leaving roughly $1.5 billion in an uncovered gap. The $663 million in state insurance funds — including $105 million in emergency funds — will only partially cover the gap.
The cuts are bad news for Eric Rabinowitz.
The Manhattanite, 45, won a $2.25 million verdict in 1983 — after a botched operation left him blind in one eye — and the judge steered him into an annuity from a state insurer, he told The Post yesterday.
That insurance company turned out to be ELINY. He thought the policy was safe.
In fact, in 2007, then-Gov. Eliot Spitzer trotted him out at a press conference called to allay fears about ELINY policies after its California parent became insolvent.
"It's refreshing to find out that the government really can come through," Rabinowitz said at the time.
Not so much, it now appears.
Rabinowitz said he expects to find out today how much his annuity will be cut.
He expects it could amount to hundreds of dollars a month and that he'll have to find some work.
"This is devastating," he told The Post. "I'm about to hit the job market without much experience in any one particular industry.
"To say this cutback couldn't have come at a worse time [considering the job market] is an understatement," he added.
Insurance-industry executives admit a bankrupt state fund could present an issue for New York policyholders.
But, they added, legislation to capitalize a new fund is expected next year — plus no state insurance company is close to collapse.
The ELINY situation underscores efforts by Lawsky's Department of Financial Services to tighten the screws on private equity firms' ownership of annuity companies.
"This is certainly one of the reasons that has driven the [DFS] to focus on private equity [in the annuity business]," said one person familiar with the situation, since firms including Apollo Global Management and Guggenheim Partners are allegedly using annuities to make risky investments.
jkosman@nypost.com
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