Recoveries from London Market Insolvents and Non-Participating London Market Solvent Insurers
The London Market
Common to almost any policyholder's coverage chart is London market coverage, sometimes representing vast amounts of an insured's total coverage. Unlike traditional insurance policies written by U.S. domestic insurers, each London market policy is actually insured by a collection of different entities that agree to share, on a percentage basis, the risk associated with the policy. Over time, several insurers have become insolvent, including KWELM (which includes Kingscroft Insurance Co., Ltd., Walbrook Insurance Co., Ltd., El Paso Insurance Co., Ltd., Lime Street Insurance Co., Ltd. and Mutual Reinsurance Co., Ltd.), Bryanston, Andrew Weir, English & American, Orion, London & Overseas, Bermuda Fire & Marine, Sovereign, British National/North Atlantic/Bellefonte, and United Standard, among others.
Settlements with the London Market via Equitas
Since the mid 1990s, Equitas has essentially operated as the leader of the solvent London market insurers and all negotiations regarding London market coverages have been conducted through Equitas. As the policyholder negotiates with Equitas to resolve its asbestos, pollution or other long-tail liabilities, the resulting settlements are typically "gross" settlements. These gross settlements provide that the insured will actually recover only a percentage of the gross settlement amount that corresponds to the percentage of the insured's London market coverage that is solvent and participating in the Equitas process. Insolvent London market companies and solvent non-participating insurers often represent a significant portion of a policyholder's London market coverage, resulting in a greatly reduced "net" settlement amount from the Equitas agreement.
The Insolvent London Market
Contrary to popular belief, many of the insolvent insurers still have some assets; they are considered "insolvent" only because their expected liabilities are greater than their existing assets. These insolvent insurers continue paying out funds on claims, albeit not at full claim value. Many of the insolvent insurers are in court-approved "schemes of arrangement" that pay a dividend of up to 25%, with additional payments in subsequent years. It is expected that the eventual payout for several insolvent insurers could be as high as 50%. Many of the "schemes of arrangement" provide that the insolvent insurers follow the terms of the settlement negotiated by the insured with Equitas.
Once a policyholder has settled with Equitas and received a net settlement amount, common practice has been to write off the insolvent portion of the settlement. Insureds who have ventured down the road to recovering from the insolvent London market have discovered that it is an abyss of technicalities and paperwork, often yielding more frustration than money. Yet in many cases, the amount of money represented by the insolvent insurers is significant, presenting an opportunity for the recovery of additional settlement dollars.
Solvent Non-Participating London Market Insurers
In some instances the Equitas settlement will also exclude funds due from solvent insurers who, for a variety of reasons, do not become involved in the Equitas settlement. In contrast to the insolvent carriers, the solvent but non-participating insurers have adequate funds to pay claims and therefore, the likelihood of recovering a solvent insurer's full share of the total settlement is high. These non-participating insurers are often overlooked as an avenue for recovery of additional funds from the London market coverages.
Dispute Resolution Management, Inc. has joined with its UK affiliates to offer a unique solution to the problem of collecting from these difficult insurers. We work hand-in-hand to offer a cost-effective, time-efficient method of recovering money available from the London market insolvent and non-participating solvent insurers. Once a policyholder has reached a settlement with Equitas, DRM will compile the information needed to pursue recovery from the remaining insurers. This information will be forwarded to the U.K. affiliates, who will process the information with the insurers necessary to effectuate the available recovery. Because DRM is familiar with the insolvent recovery processes, the policyholder's claim is smoothly guided through the process without the need for significant time and effort on the part of the insured. DRM is compensated on a contingency arrangement based on a percentage of the policyholder's actual recovery; the policyholder can pursue the insolvent and non-participating solvent insurers with little cost up front and a relatively minor investment of time and effort. The DRM method offers the policyholder the opportunity to maximize its return on currently non-performing assets with a minimum of effort and expense.
The London Market Insolvent Recovery Team
DRM personnel will act as the liaison with the client company, gathering all information required to pursue London market insolvency recovery. As with any insurance claim, providing required documentation is key to presenting claims to insolvent insurers and non-participating solvent insurers. DRM's experience in presenting and settling long-tail claims provides the expertise to target information required by the insolvent insurers and non-participating solvent insurers, streamlining the cumbersome information exchange portion of the recovery process.