Legacy acquirer DARAG has entered into a loss portfolio transfer reinsurance deal with certain property and casualty (P&C) insurance subsidiaries of Hallmark Financial Services.
DARAG Bermuda Ltd. and DARAG Insurance (Guernsey) Limited entered into the deal with American Hallmark Insurance Company of Texas, Hallmark Specialty Insurance Company, Hallmark Insurance Company, Hallmark County Mutual Insurance Company and Hallmark National Insurance Company.
Under the terms of the deal, the Hallmark insurers will cede all existing and future claims on the binding primary commercial automobile liability insurance policies and the brokerage primary commercial automobile liability insurance policies up to an aggregate limit of $240.0 million.
The first layer of $151.2 million in reinsurance will be provided by DARAG Bermuda, with the Hallmark insurers retaining a loss corridor of the next $24.9 million in losses.
DARAG Bermuda will then reinsure a second layer of $27.8 million above the first layer and the Hallmark insurers’ loss corridor, and DARAG Guernsey will reinsure the top layer of $36.1 million.
Hallmark will pay the Darag units a reinsurance premium calculated as $172.9 million less net claims paid prior to the closing date.
Additionally, the reinsurers will deposit into a collateral trust account as security for their obligations $179.0 million less losses paid from January 1, 2020 through the closing date.
The loss portfolio transfer contract is expected to close on or before August 31, 2020, and will come into effect from January 1, 2020.
