Reconstruction and renewal

In Re Equitas Ltd [2009] EWHC 1595 (Ch), Mr Justice Blackburne has approved a transfer of the residual liabilities of Lloyd’s names to Equitas Insurance Ltd, the effect being that names are to cease to be reinsured by Equitas and instead their liabilities are transferred in their entirety to EIL.

Equitas: the facts

The Lloyd’s Reconstruction and Renewal (R&R) plan, agreed in September 2006, was designed to put an end to the litigation between Lloyd’s and its names, the latter having suffered substantial losses on asbestos and pollution liability insurances written in the 1980s and 1990s. The effect of R&R was to provide a means of providing finality for losses arising in 1992 and earlier years, so that names for those years could resign from Lloyd’s without fear of further losses. This was done by setting up a dedicated reinsurance company, Equitas Reinsurance Ltd, which provided names with reinsurance for their liabilities arising out of 1992 and prior years’ business. In turn, ERL entered into a retrocession contract with Equitas Ltd (a wholly-owned subsidiary of ERL), and EL took on responsibility for administering the run-off. The R&R scheme also established Equitas Policyholders Trustee Ltd, the primary function of which was to hold on trust for the benefit of policyholders certain rights of the names as reinsureds under the Equitas Reinsurance Contract.