Overview

We are a specialist company providing premier solutions

RunOff Re.Solve is a specialist company providing solutions for all aspects of discontinued insurance and reinsurance business. Our services and solutions cover the four main areas of finality, acquisition advisory, performance improvement and arbitration and expert witness. We work with significant institutional investors to identify, carry out due diligence and acquire distressed insurance assets. Once acquired, RunOff Re.Solve manages the full process of monetizing these assets. Our partnerships with these institutional investors reflect our acknowledged specialist expertise in portfolio acquisition, management and securitization.

Finality – Two Case Studies

With insurers and reinsurers looking to free up capital and management resources for live business, a key area of focus is enabling them to release trapped capital and obligations through the development and execution of schemes of arrangement and other forms of exit strategies for solvent and insolvent discontinued portfolios.

Here is a selection of case studies highlighting how we have assisted with the closure of our clients’ discontinued portfolios:

The successful solvent run off of YMCA’s Bermuda domiciled captive reinsurer

RunOff Re.Solve LLC led the run off of Y-Mutual Insurance Company Ltd from 2008 through to the conclusion of the run off via a members’ solvent liquidation in 2011.

Y-Mutual was incorporated in Bermuda in 1986 as a captive reinsurer “owned” by member YMCA’s throughout the United States. At its height, over 450 separate YMCA organizations were members of Y-Mutual.

From 1986 through the time it entered run off in early 2007, Y-Mutual provided reinsurance protection to five “fronting companies” that had insured the individual YMCA members of Y-Mutual. The individual members YMCA’s and, by extension, the front carriers and Y-Mutual, were subject to numerous auto and property liability, general liability and workers compensation claims. Y-Mutual discontinued active underwriting and went into run off in February 2007, at which time there were over one thousand pending claims subject to its reinsurance protection.

The Brief
Y-Mutual was a non-assessable mutual. It could not ask its members for further capital contributions and had to manage the run off with limited financial resources. RunOff Re.Solve designed and implemented a run off plan (in coordination with the Bermuda Monetary Authority) that allowed Y-Mutual to maintain solvency, effectively manage the claims administered by a third party service provider and honor its reinsurance obligations to the front carriers.

At the outset of the run off, it was anticipated that, if an orderly wind down of the company was possible on a solvent basis, it would take at least nine years to eliminate all of Y-Mutual’s reinsurance obligations.

Results
With RunOff Re.Solve’s guidance, Y-Mutual honored all claims to the front companies in just four and a half years after it terminated active underwriting and entered run off, less than half the anticipated time. After conclusion of all of its reinsurance obligations to each of the fronting companies, Y-Mutual was deregistered as a licensed Bermudian reinsurer and closed through a solvent members’ liquidation process.

The first US Solvent Scheme of Arrangement

Andrew Rothseid, Principal of RunOff Re.Solve LLC, designed and implemented the first “solvent scheme of arrangement” in the United States. The closure of GTE REinsurance Company Limited, through the Rhode Island process referred to as a Commutation Plan”, resulted in the:

  • Satisfaction of all liabilities;
  • Elimination of prospective operating expense; and
  • Release of trapped surplus.

GTE RE was a former Bermuda domiciled captive insurer and reinsurer, originally owned by GTE Corp. It underwrote non-related third party assumed reinsurance and retrocessional coverage from 1978 to 1989, together with its owner-related risks. The third party assumed reinsurance was written to insurers and reinsurers throughout the world and covered, principally, property, catastrophe, and casualty risks including reinsurance of asbestos, pollution, health hazard and workers compensation risks.

GTE RE went into run off in 1990 and moved its domicile to Vermont in 1994. In June 2010, GTE RE transferred its owner-related risks to an affiliated captive reinsurer and moved its domicile, containing only the non-related assumed reinsurance risks, to Rhode Island.

The Brief
Closure options available to solvent US insurers and reinsurers in run off have been limited. The task was to design, draft and negotiate an accelerated closure mechanism which would allow for termination of liabilities, elimination of ongoing expense and extraction of capital in a limited time. This closure mechanism, the Commutation Plan, had to be sanctioned by the Rhode Island Court following the approval of 50% or more of creditors by number, representing 75% or more by value of those voting in person or by proxy.

GTE RE filed the petition to implement the Commutation Plan in June 2010 and the Rhode Island Department of Business Regulation approved the Plan pursuant to Rhode Island Chapter 27-14.5 entitled “Voluntary Restructuring of Solvent Insurers.”

The timeline for the process was as follows:

Ascertainment date

December 31, 2009

Claim and proxy forms due

October 29, 2010

Meeting of creditors

November 30, 2010

Hearing to approve commutation plan

March 16, 2011

Commutation Plan effective date

April 27, 2011

Final claims submission time

August 1, 2011

Final date for payment of agreed claims

September 30, 2011

Results
On March 23, 2012 the Court entered an Order indicating that GTE RE:

  • Complied with all aspects of the Court’s February 1, 2012 Amended Implementation Order;
  • Paid all claims that were properly and timely submitted;
  • Completed the Commutation Plan; and
  • Was discharged from all obligations to all creditors.

On April 17, 2012, the Court entered an Order terminating the GTE RE Commutation Plan.

With the support and guidance of RunOff Re.Solve, GTE RE has been able to honor its outstanding obligations and paid all creditors, who submitted proper and timely Claim Forms, one hundred percent of the agreed value for their claims. Through this process it has avoided the cost and distraction of a prolonged, perhaps twenty five year, continued run off operation.

This landmark court ruling has paved the way for other similarly situated commercial insurers and reinsurers in run off to consider accelerated closure through a Rhode Island Commutation Plan as an effective exit from decades’ old long tail exposures. The Commutation Plan has affirmed the perception that it is possible to accelerate the closure and, in fact, close solvent insurance and reinsurance companies in run off in the United States, providing the process is fair, transparent and addresses the issues raised by all the stakeholders.

Acquisition Advisory

With closed books of business creating significant challenges for M&A negotiation and execution, specialist advice and support for vendors and acquirers is another major area of focus. This includes portfolio valuation, due diligence, capital allocation and post-deal operational integration. We are also helping clients to anticipate and address potential disputes and obstacles.

Performance Improvement

How run off and discontinued business is structured and managed has a key influence on the costs and its preparation for longer term resolution. Our specialist advisory services include portfolio valuation, claim and premium audit, reinsurance recovery determination, reinsurance collection and dispute resolution. We also advise regulators on legal application and developments in the market, as well as closure options for longstanding insolvent estates.

Arbitration and Expert Witness

As a leading expert in the field, Andrew Rothseid, our principal, is regularly engaged as an expert witness and arbitrator.