What happened: New York’s appellate court dismissed nearly all investor claims over $228 million in unpaid trust preferred securities issued by now-defunct insurance holding companies.
Who’s involved: ACP Re, Tower Group International, AmTrust Financial Services, National General Holdings, and related corporate entities and trusts.
What’s at stake: $228 million in aggregate principal on trust preferred securities, plus accrued interest.
Why it matters: Internal documents and balance-sheet entries suggesting debt assumption did not create contractual successor liability - a live question in any insurance holding company restructuring.
Where it stands: Appellate Division ruled October 20, 2026; may be subject to further appeal.
Internally, ACP Re carried the debt on its own balance sheet at $235 million. In court, it argued the debt was never its to pay.
A New York appellate court has sided with that argument - and handed investors holding $228 million in trust preferred securities a near-total loss.
The Appellate Division, First Department, on October 20 granted summary judgment dismissing virtually all claims against ACP Re, related entities, and affiliated trusts in Alesco Preferred Funding VIII, Ltd. v ACP Re, Ltd.
The securities were issued between 2003 and 2007 by four insurance holding companies: Preserver Group, CastlePoint Bermuda Holdings, CastlePoint Management Corp., and Tower Group, Inc. By late 2013, their ultimate parent, Tower Group International (TGIL), was effectively insolvent. ACP Re acquired TGIL through a merger that closed in September 2014.
Before the vote, TGIL’s proxy statement told shareholders the deal “would provide the best opportunity for the Company to protect existing policyholders and provide for the assumption or repayment of indebtedness, including the Company’s $235 million in outstanding principal of trust preferred securities.”
Interest was never resumed. By July 2016, the entire principal fell due. The issuers, by then defunct, paid nothing.
Investors - hedge funds and collateralised debt obligations - pursued the wider corporate group. The court dismissed every theory.
On successor liability, an unrebutted expert report established each issuer survived its respective merger as a continuing entity. The indentures’ successor provisions were never triggered. The court acknowledged ACP Re’s own memorandum stated it would “retain all the liabilities of TGIL,” and its balance sheet listed the trust preferred securities (TruPS) at $235 million. Internal documents did not change the contractual position.
The fraud claims came closest. The court found the proxy statement was “materially misleading, if not false,” and at least one investor demonstrably relied on it. But the statement targeted shareholders voting on the merger, not securities holders.
Alter ego claims failed under New York law. The court accepted ACP Re operated as a shell controlled by related interests, but domination alone was not enough. Uncontested expert evidence attributed non-payment to unforeseen adverse development on insurance policies written before 2014 - not post-merger conduct. Eight regulatory bodies had approved the deal.
Only the original issuers - who do not contest liability and cannot pay - remain on the hook.
This is a summary judgment determination by the Appellate Division, First Department, and may be subject to further appeal.
