Solvent schemes of arrangement

It is in the interests of an insurance company in run-off to dispose of outstanding claims as soon as possible so that the business can be shut down completely. Where the business consists of short-tail claims – property damage and the like – then there will be a clear point at which no further claims are possible and the run-off can be brought to an end. However, in the case of liability claims under policies written on an exposure or losses occurring basis, there is no such cut-off: claims may be presented many years after the event. This is borne out by asbestos litigation cases, where the policy called upon to respond may have been issued many years before a claim is made against the assured by a victim. The question before the Outer House of the Scottish Court of Session in Re Scottish Lion Insurance Co Ltd [2009] ScotCH CHOH 127 was whether it was appropriate for the court to approve a scheme of arrangement in respect of a solvent insurer in run-off, where the purpose of the scheme was to allow the company to be put into early voluntary liquidation. Lord Glennie refused the application.