Allstate Insurance Company, American International Group Inc., Chubb & Son and St. Paul Travelers are challenging the proposed sale of three of its asbestos and environmental run-off subsidiaries by ACE Limited to Randall & Quilter Investment Holdings of Great Britain. The insurers have asked Commissioner Diane Koken and the Pennsylvania Department of Insurance to closely examine the proposed transaction.
On Jan. 6, ACE announced that it planned to sell its ACE American Reinsurance Company, Brandywine Reinsurance Co. (UK) Ltd. and Brandywine Reinsurance Company S.A.-N.V. to Randall & Quilter. It also said it would take $279 million in after tax reserve charges on Brandywine, and another $19 million relating to the ACE Westchester Specialty unit. Century Indemnity Company, an indirect, wholly owned subsidiary of ACE, is also involved. The sales require the approval of the Pennsylvania department and the U.K. Financial Services Authority.
ACE acquired the companies as part of the acquisition of INA from Cigna in 1999. They subsequently were found to have large exposures to asbestos and environmental claims, and have become a liability for the ACE Group.
The protesting insurers fear that the sale to the U.K.-based Randall & Quilter could weaken the security relied on by policyholders and other insurance companies. They question whether, if asbestos and environmental claims continue to require increases in reserves, Randall & Quilter would have the funds needed. If the transaction is not approved, ACE’s affiliates would remain liable for such continuing obligations.
The insurers’ petition further suggests that the sale is an attempt to shift a share of Century’s run-off liabilities onto British firms outside of U.S. regulatory authorities. The insurers said ACE is trying to “place more distance between itself and the legal obligations of its subsidiaries” and to avoid Pennsylvania’s “continuing scrutiny, moral pressure and directives.”
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