On 25 June 2009, the High Court made an order approving the statutory transfer of the 1992 and prior non-life business of members and former members of Lloyd's to Equitas Insurance Limited, a newly formed FSA authorised insurance company within the Equitas Group. Mr Justice Blackburne was firmly of the view that it was appropriate to sanction the transfer scheme.
The transfer will become effective on 30 June 2009 and covers all the business reinsured by Equitas Reinsurance Limited at the time of Reconstruction and Renewal in 1996, and includes the PCW syndicates' business reinsured by Lioncover Insurance Company Limited and the Warrilow syndicates' business reinsured by Centrewrite Limited.
For further details of the transfer please see below.
In October 2006 Equitas entered into an agreement under which National Indemnity Company, a member of the Berkshire Hathaway group of companies, reinsured all Equitas' liabilities and took on the staff, operations and run-off of Equitas.
The transaction was structured to occur in two phases. Phase I was completed in March 2007.
In Phase II, Equitas will seek the approval of the High Court to transfer the 1992 and prior year non-life Lloyd's liabilities of open and closed year Names by means of a statutory transfer under Part VII of the Financial Services and Markets Act 2000 ('FSMA'). This transfer will be made to a newly formed FSA authorised insurance company within the Equitas Group. If this transfer occurs on or before 31 December 2009 National Indemnity Company is committed to provide up to an additional $1.3 billion of reinsurance cover for a further premium of up to £40 million.
As a first step to achieving Phase II, at a court hearing on 28 November 2008 Equitas obtained a waiver from those notification requirements under Part VII of FSMA with which it could not comply. Details of the waiver can be found in the Court judgment which can be viewed under "Part VII Transfer Documents". In summary, Equitas has agreed to send notice of the Part VII transfer directly to major policyholders, reinsurers and claimant solicitors and to all brokers and claims handlers, as well as to undertake a series of presentations. In addition, Equitas will publish notice of the Part VII transfer in one national newspaper and one business newspaper in each of the 30 EEA States along with notices in countries such as the US, Canada and Australia.
A second Court hearing took place on 20 April 2009, at which the Court confirmed its initial directions for providing notification of the Part VII transfer to those affected or potentially affected by it.
A further and final Court hearing is expected to take place on or about 24 June 2009, when the Court will be asked to approve the Part VII transfer. Subject to the approval of the Court, it is proposed that the Part VII transfer will take effect on 30 June 2009. At that time, and in the absence of unforeseen developments, Equitas intends to buy all $1.3 billion additional reinsurance available under the agreement with National Indemnity Company. Once Phase II is completed as planned, policyholders will benefit from a total of $7 billion reinsurance cover from National Indemnity Company over and above Equitas' 31 March 2006 carried reserves and open and closed year Names will achieve finality in respect of their 1992 and prior year non-life Lloyd's liabilities under English law.
As required by FSMA, a report on the Part VII transfer has been prepared by an independent expert, Mr Allan Kaufman of Navigant Consulting (Europe) Limited.
Copies of the summary of the Part VII transfer scheme document and independent expert's report, the independent expert's full report, the independent expert's supplemental report and other documents relevant to the Part VII transfer may be viewed under 'Part VII Transfer Documents'.
