U.S.-based subsidiaries of QBE Insurance Group Ltd. revealed additional details of a loss portfolio transfer and quota share involving certain discontinued commercial auto business.
The affiliated Equator Reinsurances Ltd. assumed and then retroceded case and incurred-but-not-reported reserves to ILS Property & Casualty Re II Ltd., which QBE's U.S. units described as a wholly owned subsidiary of Bermuda-based Armour Group Holdings Ltd.
QBE stated in its 2017 annual report that Equator Re facilitated the loss portfolio transfer of $436 million of legacy North American reserves to a third party, which the company did not name in that filing.
"The purpose of this transaction is to bring finality to this book of discontinued programs and thereby effectively mitigate any risk of substantial adverse development related to these programs at a QBE Group level," QBE Insurance Corp. reported in the notes to its 2017 annual statement, which S&P Global Market Intelligence recently obtained.
QBE's U.S. subsidiaries previously engaged in a similar series of internal and external transactions in 2016 involving 99 discontinued programs. The external counterparty to which Equator Re retroceded the applicable business in that case was Cavello Bay Reinsurance Ltd., a unit of Enstar Group Ltd.
A review of disclosures made in the 2017 annual statements of the eight members of the QBE North America pooling arrangement with retentions in excess of zero finds that the companies' net premiums earned and net losses incurred decreased by $212 million, apiece, in the aggregate, such that there was no net impact from the loss portfolio transfer on their statutory income statements. QBE Insurance Corp., based on its pooling percentage of 36.5%, reported a $77.4 million decrease in its earned premiums and net losses incurred as a result of the transaction.
Armour Group focuses on the creation and implementation of solutions and acquisitions within the runoff and other specialty sectors of the global insurance and reinsurance marketplace. The company announced in January that it raised up to $500 million in equity commitments in partnership with an Aquiline Capital Partners LLC-led investor group to help further its pursuit of global P&C runoff opportunities. In connection with that transaction, the former Armour holding company was to rename itself Trebuchet Holdings.
ILS Property & Casualty Re Ltd. purchased runoff insurer Rampart Insurance Co. in 2016. The heavily redacted Form A filed in connection with that transaction described the buyer as a Bermuda segregated accounts company that is an indirect, wholly owned subsidiary of ILS Property & Casualty Master Fund Ltd. Armour Group was also referenced in the application. Rampart entered into an administrative and management services agreement with the Armour Risk operation upon completion of the deal.
Armour Group did not immediately offer comment.
