Dangerous waters: Run-off need not impact on the smooth running of an insurance pool.

05 July 2004 (Leader column)

INSURANCE DAY

Press Coverage:
Run-off moves to another level

TWO significant moves in the run-off market unveiled at the end of last week indicate the variety and robustness of the sector. Most prominently, Omni Whittington was named the successful bidder to buy Singapore's Reliance National Asia Re, a subsidiary of failed US carrier Reliance National. That deal, which will see Omni Whittington run off the liabilities of Reliance National Asia, is expected to be the latest of several imminent transactions in the region.

Recent Press Coverage

(Spring 2008) Time to reconsider reinsurance(Oct 2007) High court sanctions Ruxley acquisition of Generali unit(Oct 2007) Ruxley in landmark reinsurance-funded acquisition(Apr 2007) Ruxley in Generali run-off talks(Autumn 2006) Part VII business transfers - adding flexibility to the run-off equation(Spring 2006) Why we need a scheme monitor(Spring 2006) BAIC and after(Feb 2006) Solvent Schemes of Arrangement Conference(Nov 2005) Scheming for solvency(Oct 2005) A wake-up call(Sept 2005) Time To Wake Up(Sept 2005) Free Audio Conference: Rating the Raters(Aug/Sept 2005) Air Your Views(Aug 2005) Ruling could curtail solvent runoff schemes(March 2005) Tackling The Pools(Spring 2005) Selling like hot cakes(Spring 2005) The scheming solution(28/02/05) Influx of capital can impact premiums(Feb 05) Bringing finality to underwriting pools(Winter 04) Dangerous waters(04/11/04) Solvent schemes offer real boost(01/09/04) Buying Run-off(05/07/04) Run-off moves to another level(03/02/04) Run-off on a positive note(2004) 2003 A year of innovation(Winter 03) Ruxley buys Aviation & General(06/10/03) Ruxley takes whole of A&G(04/07/03) End of asbestos saga?(03/07/03) Ruxley closes APH book(Summer 03) Vulture Culture?

Meanwhile in London, Begbies Traynor and LCL Group have joined forces to conduct a solvent scheme of arrangement on the now-closed London operations of Quincy Mutual. The business is essentially international property reinsurance written through the US mutual’s London office between 1999 and 2002. A significant difference between these scenarios is that Quincy Mutual continues to operate in the US and is providing full financial backing to the scheme, ensuring all creditors are paid in full. In fact, the principal benefit of the scheme for Quincy Mutual is that it speeds up the finality. Once the High Court approves it, creditors will be given a deadline after which no more claims will be accepted.

Such schemes appear to be becoming increasingly popular as they provide speedier finality and thus bring lower expenses. Of course, schemes like this are considered simpler for solvent firms and those with predominantly short-tail exposures property reinsurance is a classic example. But examples such as Ruxley’s scheme for former AGF subsidiary City General and the progress made by the scheme administrators of Kwelm suggest there is also potential even for more complex longer-tail lines. With the signs of a downturn at least in some lines in the not-too-distant future, bringing with it the prospect of carriers looking to end their participation in some sectors, it is heartening to see innovation continuing in the run-off arena. A growing number of firms will be looking to take advantage of run-off services, and schemes that give swift and certain finality will be very valuable.