RSA Insurance Disposes of £834M ($1B) of UK Legacy Liabilities with Enstar

February 8, 2017

RSA Insurance announced it has signed contracts, to dispose £834 million (US$1.04 billion) of UK employers’ liability legacy business to Enstar Group Ltd.

The transaction initially takes the form of reinsurance (a 100 percent quota share policy) to be effective at Dec. 31, 2016. This will be followed by completion of a subsequent legal transfer of the business, RSA said in a statement.

RSA explained that the transaction helps its capital position by adding approximately 17-20 points of Solvency II coverage.

“We are pleased to have achieved this valuable risk clean-up transaction with Enstar. It allows us to focus even more on driving the outperformance of RSA’s continuing businesses. Earnings accretion, risk reduction and capital improvement are a happy combination to report,” said Stephen Hester, RSA Group chief executive.

He went on to say that RSA expects “to deploy the capital resources released to benefit earnings and capital quality through additional debt retirement in 2017.”

Details of Transaction

The transaction with Enstar, the Bermuda-based legacy acquisition specialist, covers £834 million ($1.04 billion) of undiscounted liabilities, net of reinsurance, or £957 million ($1.2 billion) gross of reinsurance, relating to business written in 2005 and in prior years, RSA explained.

Around 75 percent of these liabilities relate to asbestos, with the balance mainly comprising abuse, deafness, marine and aviation liabilities, said RSA.

The reinsurance premium paid by RSA to Enstar is £799 million ($994 million), settled through the transfer of a £682 million ($848.5 million) portfolio of investment grade assets with the balance in cash.

In 2015 the business accounted for a pre-tax loss of £39 million ($48.5 million) in RSA Group’s financial statements, said RSA, noting that around £35 million ($43.5 million) of net discounted post-2005 legacy liabilities will remain with RSA after the transaction.

Following the initial reinsurance, which will transfer the economics of the portfolio up to the policy’s limits, the parties will pursue a portfolio transfer of this business under Part VII of the Financial Services and Markets Act 2000, which would provide legal finality for RSA’s obligations, said Enstar in a statement.

The transfer is subject to court, regulatory and other approvals. RSA said the Part VII transfer is expected to be completed within 18-24 months.

Commenting on the transaction, Dominic Silvester, Enstar’s chief executive officer, said, “RSA’s sizable portfolio is an attractive opportunity for Enstar that substantially expands our presence in the U.K. employers’ liability area, a market that has seen a great deal of activity recently. We welcome the opportunity to partner with RSA, a leading multinational insurance firm, in structuring and executing a transaction for this large legacy portfolio.”

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