04 October 2007
Insurance Insider
Insurance Insider
(June 2010) Time to rethink APH reserving?(October 2009) Scottish Lion shock decision will be appealed, vows PwC(September 2009) Legacy industry debates ramifications of Scottish Lion ruling(August 2009) Ruxley on the hunt for APH run-off business(July 2009) Industry Matters: Solvency II The Clock Is Ticking(June 2009) Cavell Rendez-Vous: Back to reality in run-off pricing(Summer 2008) Legacy Leaders - The Norwich Rendez-Vous rountable(Spring 2008) Time to reconsider reinsurance
In April, The Insurance Insider, revealed that Ruxley was in talks with Generali to buy the London branch of the Italian giant's Swiss subsidiary through City General, a Financial Services Authority (FSA) authorised (re)insurer that has ceased underwriting and which was acquired by Ruxley in 2002.
London-based Ruxley has continued to decline to comment on the GAG acquisition. However, details of the transaction have been disclosed in an Explanatory Circular to GAG policyholders.
The document shows that Ruxley will acquire the GAG business via a Part VII transfer, which enables UK courts to approve the transfers of liabilities (and assets) from one entity to another subject to the consent of the FSA. Critically, the effect of a Part VII transfer alters the legal rights and duties of the insurer without the individual consent of each policyholder.
According to the Independent Expert's report summarised in the circular: "The Transfer will result in City General receiving an additional capital injection, together with the benefit of a new reinsurance policy from XL Re Ltd, providing additional coverage to protect the Transferring Business. Together the capital injection and the new reinsurance coverage provide sufficient capital resources to meet the worst reasonable estimated outcome for the Transferring Business."
This proposed use of reinsurance in combination with a capital injection to provide the additional security necessary to satisfy the FSA that an unrated run off entity, such as City General, is sufficiently well funded to receive a run off book of business from an 'A' rated underwriting operation, is thought to be the first of its kind.
Market experts have suggested that by taking this approach, not only is the cost of raising the statutory capital significantly cheaper, but also policyholders have the additional comfort that the transferor in the deal is backed by a company with an A+ rating If the deal is completed, it will be regarded as a significant acquisition by Ruxley, whose last major purchase was Aviation & General in October 2003.
GAG is domiciled in Geneva and is rated A+ with AM Best.