A First for Solvent Scheme of Arrangement
Resolving the Past
Ian Marshall, Managing Director in our Insurance team, discusses the first solvent scheme of arrangement sanctioned under the UK’s dual PRA/FCA regime. A solvent scheme of arrangement for reinsurance business in run-off – a solution thought dead by some – was sanctioned by the English courts on 3 May 2016.
This scheme, for which FTI Consulting acted as principal business adviser, is for a UK subsidiary of one of the Japanese insurance groups and is the fi rst to be approved in the UK for several years.
“The primary purpose of a solvent scheme of arrangement as applied in the insurance world in the UK is to value and settle all remaining claims and to cut off future liability.”
Why a solvent scheme of arrangement?
The primary purpose of a solvent scheme of arrangement as applied in the insurance world in the UK is to value and settle all remaining claims and to cut off future liability. The cut off is achieved by imposing a bar date after which claims can no longer be submitted. The counter balance to this significant change in ability to make claims is that approval by claimants, regulators and the court is required. These hurdles require significant effort to:
- frame proposals which are likely to be supported;
- manage the creditor population to be as certain as possible that creditors will vote for the scheme;
- value the votes; and
- prepare evidence for regulators and the court that all necessary steps have been taken.