IBAs: getting your piece of the puzzle

What happens if brokers go bust while holding monies? JEREMY HILL and CHRISTOPHER HENLEY of Debevoise & Plimpton look at the problem of trusts and insurance broking accounts

THE insolvency of a contracting party is never good news. It’s bad enough if it’s the other party, and generally worse if it’s you. And there is more scope for problems to occur if there is a broker in the contractual chain, which is usually the case. If the broker is holding monies at the time of his insolvency, an immediate question faced by the parties is whether payment by the insurer to the broker constitutes good payment to the insured of his earlier claim, or whether the insurer has to pay again to discharge his obligations.