Zurich Insurance, a subsidiary of Zurich Insurance Group, has entered into an agreement with Catalina Holdings that will see the majority of Zurich’s UK employers’ liability (UK EL) policies for 2006 and prior underwriting years transferred to Catalina.
This major portfolio transfer represents a significant step forward in Zurich’s efforts to simplify its business.
As of 31 December 2017, the portfolio comprised gross liabilities of $2 billion relating principally to industrial disease related claims, including asbestos.
This transaction is Catalina’s first since it announced the completion of a $700m equity capital raise in October, which took its available equity capital commitments for transactions to $850m.
George Quinn, Group Chief Financial Officer, Zurich Insurance Group, commented: “The sale of this portfolio reflects Zurich’s strategy to eliminate or reduce exposure to legacy lines of business. This focus on actively managing capital allocation to improve overall returns will continue in 2019.”
The transaction will be completed in two steps. The first consisting of a reinsurance agreement between Zurich Insurance and Catalina General Insurance.
The second step will see policies and liabilities transferred to Catalina London Limited, a UK insurer.
The transaction is subject to regulatory and court approvals, with the final transfer expected to occur within two years.
In the fourth quarter of 2018 upfront expenses related to the transaction are expected to lead to a small loss recognised in business operating profit, while over the full period to completion of the transfer of the policies the Group expects to achieve an overall positive contribution to the business operating profit.
Chris Fagan, Chairman and Chief Executive of Catalina, added, “This transaction with Zurich demonstrates our ability to execute on larger and complex transactions.”
“Our substantially increased financial firepower gives us scope to provide finality solutions to a range of much larger legacy market opportunities as the sector develops into a more accepted and useful part of the insurance market.”