Restructuring and insolvency

Published on 08 January 2020

In this chapter of our Annual Insurance Review 2020, we look at the main developments in 2019 and expected issues in 2020 for restructuring and insolvency.

Key developments in 2019

In one of the leading insurance insolvency and restructuring cases of 2019, Ballantyne Re, plc (Ballantyne) used an Irish scheme of arrangement to restructure its reinsurance obligations and outstanding indebtedness (the Scheme).

Ballantyne was an Irish special purpose vehicle formed to enter into and perform a reinsurance agreement in relation to a defined book of life insurance policies issued in the United States.  

RPC advised one of the key creditors under the Scheme, enabling the Scheme to smoothly progress through to sanction and implementation.

The use of English schemes of arrangement to carry out restructurings in the insurance run-off field is, of course, well established. The Ballantyne Scheme is an example of the development and use of schemes in jurisdictions with similar restructuring frameworks outside of the UK.  

It remains to be seen if this trend develops further in light of Brexit, particularly with progress being made on the long-mooted Dutch scheme equivalent. However, in the short term, we expect that the UK will continue to be the preferred jurisdiction for complex international insurance restructurings, due to its well-developed jurisprudence and knowledgeable and experienced judiciary. UK lawyers can also look forward to continued involvement in overseas schemes, in which the import of their knowledge and experience is likely to be valuable.

What to look out for in 2020

Having seen, in readiness for Brexit, a number of large corporate groups relocate their head offices to Europe, especially Luxembourg, we believe that restructuring will continue apace.  

Run-off consolidations will increasingly utilise the laws and regulations of the jurisdictions where the risks are located outside the UK by setting up subsidiaries in the target jurisdiction in order to run-off the business in a process of ongoing commutation. This process will complement the scheme of arrangement process which can be used in the UK and certain other jurisdictions permitting a similar process (e.g. off shore jurisdictions, Singapore and in the future, The Netherlands) where finality solutions are needed, i.e., lump sum payments of claims under the cram-down provisions of a scheme.

Authored by Paul Bagon, Tim Moynihan and Vanessa Beazley.

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