Prospect's captive insurer CHIC and its Cayman winding-up

analysisConnecticut Healthcare Insurance Company (CHIC) is a Cayman Islands exempted company whose registered owner is Prospect ECHN, Inc., an indirect wholly owned subsidiary of PMH; CHIC issued insurance policies to the debtors and ceded the risk to reinsurers under reinsurance contracts. According to CHIC's foreign representatives, in Pennsylvania before October 1, 2020 the first $500,000 of liability on a claim was insured through Prospect Medical Holdings Risk Retention Group, Inc., a self-insurance programme of the Prospect debtors, and the next $500,000 by the state's MCare fund, with coverage above that from third-party excess insurers. From October 1, 2020 claim amounts above $1 million, up to a cap of $80 million, were insured through CHIC, subject to the debtors' self-insured retention between $1 million and $13.5 million, and CHIC reinsured those obligations with third-party insurers. ^{1 2}

analysisCHIC filed a winding-up petition in the Financial Services Division of the Grand Court of the Cayman Islands; its foreign representatives date the petition to March 12, 2026, while the court's winding-up order refers to a petition filed on March 16, 2026. By order of March 18, 2026 Orla O'Regan and Michael Pearson were appointed joint provisional liquidators and foreign representatives, and they, the Prospect debtors and the reinsurers reached a settlement in principle under which the reinsurers would pay the debtors about $26 million in exchange for the commutation of CHIC's policies and reinsurance, excluding the 2025–2026 policy year. On May 28, 2026 the Grand Court (FSD 93 of 2026) ordered CHIC to be wound up, discharged Pearson and O'Regan of JTC Special Situations Limited as provisional liquidators and appointed them joint official liquidators; the Cayman Islands Gazette notice gives CHIC's registration number as 174133, with its registered office at Marsh Management Services Cayman Ltd. ^{1 2 3}

analysisThe foreign representatives sought recognition of the Cayman proceeding in the U.S. Bankruptcy Court for the Northern District of Texas (Chapter 15 case No. 26-32010, Judge Stacey G. Jernigan). Personal-injury claimants objected to the petition, and the foreign representatives replied to the objections. After an evidentiary hearing on June 9, 2026 the court granted recognition with a narrower order: the June 10, 2026 order recognises the Cayman proceeding as a foreign main proceeding and confirms Pearson and O'Regan as foreign representatives, and states that it does not extend the Cayman stay to the debtors in PMH's Chapter 11 case or to CHIC's insurers and reinsurers. PMH's plan administrator moved in the Chapter 11 case (Docket No. 5082) for approval under Bankruptcy Rule 9019 of a settlement with CHIC and the settling reinsurers, and the Prospect GUC Trust appeared as a creditor in the Chapter 15 case. ^{4 5 2}