Finality Solutions

 

Compre focuses on solutions to enable non-life insurers and reinsurers to achieve operational, economic and legal finality for their legacy business.  The following techniques are used: Portfolio Acquisition (Insurance Business Transfer), Share Sale and Loss Portfolio Transfer (a Reinsurance Solution).

Portfolio Transfer

This solution is full legal, economic and administrative transfer of insurance liabilities and related financial assets to a Compre risk carrier.  The particular mechanism used to achieve this depends on the legal and regulatory environment governing the domicile of the transferor company.  Completion of the transfer removes all future legal and economic liabilities from the seller.  In some circumstances a portfolio transfer can be combined with an ongoing reinsurance solution, this is especially effective where the legal transfer mechanism is lengthy.

Knowledge and experience of the process in different territories is paramount to ensure a smooth and certain transfer process.  Compre has undertaken transfers using both UK Part VII legislation and transfers under EU directives in Denmark, Finland, France, Germany and Sweden.  In the UK, the Part VII transfer mechanism is approved by the UK courts and in other EU territories portfolio transfer are approved by their respective insurance regulators.

For EU Insurance Business Transfers, the process does not automatically bind the outwards reinsurance contracts protecting the transferring liabilities.  Compre has structured transactions to deal with this challenge by using EU/EEA corporate merger law.

Loss Portfolio Transfer

Loss Portfolio Transfer (Reinsurance Solution)

This solution provides economic and administrative finality for the seller – there is no legal transfer of insurance or reinsurance policies.  This is usually achieved by agreeing the terms of a 100% Net Quota Share reinsurance agreement with a Compre-owned risk carrier.  The economic and administrative transfer is typically effective immediately upon signing and will usually not require regulatory approvals.

This type of solution can be used as the first step to achieving full legal finality (via an Insurance Business Transfer) in circumstances where the legal process takes an extended period of time.  It can also be used where full legal finality is difficult to achieve or legislation simply does not exist.

Company Acquisition

The sale of the company – typically a subsidiary that writes business that is no longer core to the group’s goals – will be achieved by entering into a share purchase agreement that covers the sale of 100% of the shares in the company to Compre.  The sale will require the consent of local regulators to the change of control and the timescale for this varies but is typically 3-6 months.

Why seek finality for your legacy business?

•The portfolio or company is no longer core to current business focus
• Volatile and complex claims (e.g. asbestos) can be challenging to manage
• Legacy business ties up capital which could be redeployed to support ongoing, core business
• Solvency II will drive more stringent capital allocation across insurance/reinsurance groups in the EU
• Solvency II data requirements demand the investigation and analysis of old, archived records or their conversion onto new systems
• The skilled people with the knowledge of the claims either retire or leave
• Operational efficiency – applying your skilled resource to generate current and future profits rather than being a cost to manage the past

All of these issues are familiar reasons why an insurance or reinsurance group might consider finality for its legacy business.

Why seek finality for your legacy business?

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