Release of capital to support core and/or new business opportunities
Remove the drag caused by non-core legacy business
Operational changes such as IT developments or loss of experience/knowledge/people
Shareholder scrutiny of long tail claims which can be difficult to predict, understand and manage
Solvency II has highlighted the capital tied up in legacy business, generating little return
Remove volatility risk and achieve finality
This is also known as an Insurance Business Transfer and is the legal transfer of insurance policies, insurance liabilities and related financial assets to a Compre risk carrier. It provides full legal, economic and operational finality for all insurance liabilities on completion of the legal transfer. The local jurisdiction determines the mechanism of transfer and, dependant on the jurisdiction, the legal transfer can take an extended period of time. Few EU jurisdictions allow for the automatic transfer of assets supporting liabilities. This can impact on outwards reinsurance protections. Compre has provided structured solutions that have secured the outwards reinsurance assets for the benefit of both parties. A Portfolio Acquisition is often initially supported with a Reinsurance Solution.
This is also known as a Loss Portfolio Transfer (LPT) and is typically achieved by agreeing the terms of a 100% Net Quota Share reinsurance agreement. It provides economic finality for the seller, but no legal transfer of insurance or reinsurance policies and can be effective immediately. A Reinsurance 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. The LPT may also be accompanied by a Run-Off Management Agreement (ROMA), which provides operational finality for the reinsured and is, again, a structure that could provide almost immediate relief to a transferor.
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. Non-insurance due diligence is also required and completion of the change of control will require the approval of local regulators. Legal, economic and operational finality is achieved on completion and will typically take 6 months.