Tharp & Associates

Litigation Support and Expert Witness

Forensic Accounting

Insurance companies are financial institutions charged with the public trust. Accordingly, the “insurance promise” requires extensive regulation of insurance companies, including reporting and disclosure requirements.

The Tharp team routinely performs comprehensive forensic accounting in delinquency proceeding engagements to determine both the cause and effect of the troubled insurance company and the balance sheet and income statement dates at which the insurer became impaired, illiquid or insolvent. Moreover, the forensic accounting process identifies and facilitates pursuit of culpable defendants primarily in civil litigation, although Tharp does make criminal referrals, as well.

Tharp’s forensic accounting expertise and diligence also extends to engagements separate and apart from the receivership proceedings wherein we serve as Special Deputy Receiver/Assistant Receiver. Many of our other expert engagements involve troubled insurers, too, and require significant forensic accounting, key record reconstruction and identification and analysis of significant events, bad acts, self-dealing and malpractice.

Tharp has significant expertise in both NAIC Statutory Accounting Practices and AICPA Generally Accepted Accounting Principles. Tharp has vast experience and is adept in identifying violations of Generally Accepted Auditing Standards (GAAS), Actuarial Standards of Practice, Breach of Fiduciary Duty, Negligence, Negligent Misrepresentation and Fraud Claims and provides expert testimony in conjunction with these causes of action.

Financial Statement Preparation

Following the culmination of the forensic accounting process, Tharp professionals proceed with preparation of financial statements reflecting the true financial position of the troubled insurer.

The basis of accounting for insurers may differ depending on the financial position of the insurer. Healthy insurers and insurers in rehabilitation proceedings prepare financial statements based on Statutory Accounting Practices. Statutory Accounting Practices, an Other Comprehensive Basis of Accounting, are more conservative than Generally Accepted Accounting Principles (GAAP), with an emphasis on solvency and adequacy of surplus and therefore on liquidation accounting rather than going concern accounting. Stated differently, the emphasis of Statutory Accounting Practices is on the balance sheet rather than the income statement.

Tharp has developed a Liquidating Balance Sheet (LBS) reporting format for insolvent insurers subject to a final Order of liquidation. Assets are marked-to-market and/or otherwise conservatively valued, liabilities are quantified by creditor class, and assets are then allocated to cover liabilities pursuant to the priority of distribution statute in that particular domiciliary state.

The LBS reporting format is an excellent tool for creditors, clients and the Court to estimate distribution percentages to creditor classes during the liquidation proceeding. This is particularly so as data and information become better, as assets are marshaled and as litigation settlements or judgments are achieved, and as liabilities are quantified.

Expert Witness Engagements

Tharp and Associates is retained frequently for selected expert witness engagements involving complex litigation exclusively within the insurance and reinsurance industries, providing expert opinions and testimony for both Plaintiffs and Defendants.

Tharp has significant expertise in a variety of areas:

  • Insurance Company Management
  • Operations
  • Financial Reporting
  • Reinsurance Assumed and Ceded
  • Novation Transactions
  • Insurance Holding Company Systems Transactions and Filings (Forms A, B, C And D)
  • Rehabilitation Plans/Liquidation Plans
  • Structured run-offs
  • Mergers and Acquisitions
  • All Facets of Delinquency Proceedings
  • Operating Publicly-Held Insurance Company Subsidiaries
  • Statutory Accounting Practices
  • Audit Malpractice

In complex litigation it is essential to undertake a thorough review of all pertinent documents and data in the case to obtain a clear, comprehensive and global understanding of the chronology of events, material issues, material transactions and causes of action relevant in the litigation. We pride ourselves in identifying litigation methodologies to assist our clients in obtaining prevailing positions.

As an effective expert, we believe the expert report must absolutely tell the story, incorporating the critical elements, documents and data in the case. Principals of Tharp author comprehensive and compelling expert reports, replete with pertinent exhibits, documentation and data to accommodate the trier-of-fact.

The culmination of the expert engagement process generally is both deposition and trial testimony. Having testified hundreds of times, Tharp has vast experience in discovery, depositions, trial testimony, arbitration, and mediation dispute resolution.