AIRMIC set up a task force to investigate solvent schemes of arrangement after seeing the number of such schemes rise to more than 20 at present from an estimated three in 2003 and seven in 2004. Under such a scheme, an insurer that wants to withdraw from business or from a class of business is allowed to keep any funds remaining once it negotiates settlement of outstanding liabilities with its creditors, mainly policyholders. A particular shortcoming reported by AIRMIC members is the status of incurred but not reported (IBNR) claims, with persistent complaints that these are being heavily discounted and voting rights for this class of creditor reduced.
Members have also complained about schemes being presented in confusing ways and lacking important information.
AIRMIC is also following with interest the expected appeal against the refusal in July 2005 by the High Court to sanction a solvent scheme put forward by three major insurance companies for their joint venture, the British Aviation Insurance Company (BAIC), in which one of the objections was to the treatment of IBNR creditors. Giving judgment, Mr Justice Lewison said, 'The purpose of the scheme is to allow surplus funds to be returned to shareholders in preference to satisfying the legitimate claims of creditors.'
