Bermuda-based Trenwick Group Ltd. announced that it has commenced an arbitration proceeding seeking $55 million in damages and other relief against European Reinsurance Company of Zurich, a subsidiary of Swiss Re.
Trenwick notified European Re at the end of March that it was exercising its put agreement under a Catastrophe Equity Securities Issuance Option, that entitled Trenwick to put (sell) to European Re 550,000 convertible perpetual preferred shares at a purchase price of $100 per share, a total of $55 million.
The arrangement was part of an agreement to assure the adequate capitalization of Trenwick’s La Salle Re, which had incurred substantial losses from the Sept. 11 attacks (Trenwick has since sold the division to Endurance Specialty Insurance).
European Re, however, according to Trenwick’s complaint, has failed to purchase the 555,000 shares. James F. Billett, Jr., Trenwick’s Chairman, President and CEO, stated that, “The unfortunate unwillingness of Swiss Re to honor its clear cut obligations under the Catastrophe Equity Securities Issuance Option Agreement forces us to demand arbitration. While no dispute resolution mechanism is certain, we are confident that the facts support our position and believe we will ultimately prevail.”
So far Swiss Re hasn’t commented on the case.
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