For some time now, people have been keeping a close eye on several of Puerto Rico’s major insurance carriers due to rumors of insolvency. One of those insurance carriers, Real Legacy Assurance, has unfortunately confirmed these rumors and recently filed for liquidation. According to reports, the carrier has paid nearly $40 million dollars to settle approximately 630 claims – however, many more Hurricane Irma and Maria claims remain unresolved.1

Generally, the liquidation process begins with the filing of a petition for liquidation. Between the date of the filling of the petition and the denial thereof, no prescriptive term or defense of laches shall run with respect to any action pending against the insurer.2 Once an order of liquidation has been issued by the court, then all policies in effect at the time, other than life or disability insurance, shall continue in effect for the lesser of these periods:3

  • Thirty (30) days from the date of the liquidation order;
  • The expiration of the policy coverage;
  • The date in which the insured replaced the insurance policy with equivalent insurance from another insurer, or has otherwise terminated the policy;
  • The liquidator has transferred the policy obligations;
  • The date purposed by the liquidator and approved by the Receivership Court to cancel coverage.

During this period, the Commissioner may petition the court for a judicial declaration of insolvency after making the appropriate findings.4 The court may issue the declaration after providing due notice and holding all necessary hearings. The court can also order the dissolution of the insurer by petition of the Commissioner at the time or after the liquidation order is granted.5

With respect to Real Legacy, once an order for liquidation is granted by the local court, all claims and processes against the carrier will be stayed for six months. During this period, the Association of Miscellaneous Insurance Guarantees of Puerto Rico will determine which hurricane claims will be paid and which will be rejected. This period will not affect those claims sold within the “business wallet” to Universal Insurance in Puerto Rico and Guardian General in the Virgin Islands of BVI and USVI.6

The situation surrounding Real Legacy’s insolvency in Puerto Rico illustrates why it is so important for all insurance carriers to ensure that they are prepared financially for catastrophes, including holding enough in reserves, to protect themselves and just as importantly their insureds. Hopefully, both carriers and those responsible for overseeing insurance carriers in Puerto Rico can learn from the aftermath of Hurricanes Maria and Irma and make sure that policyholders remain protected against such insolvency issues in the future.
1 Joanisabel González, Rumbo al Tribunal la Orden de Liquidación de Real Legacy, (January 1, 2019), available at:
2 Liquidation Actions by and against the liquidator, 26 L.P.R.A. § 4021 (3).
3 Liquidation Continuation of coverage, 26 L.P.R.A. § 4016 (1).
4 Liquidation Orders, 26 L.P.R.A. § 4015 (4).
5 Liquidation Dissolution, 26 L.P.R.A. §4017 (1).
6 See, supra, Footnote 1.