WFUM Pools – Background FAQs |
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The contents of this website are not a substitute for the contents of
the Scheme document (which includes the Scheme and the Explanatory
Statement). Scheme Creditors (as defined in the Scheme) should read and
consider carefully the full text of the Scheme document.
Frequently Asked Questions 1 What are the
WFUM Pools?
2 What is a
Scheme of Arrangement?
3 What is the
"WFUM Pools Scheme"? Is this a solvent Scheme?
4 What is the
position of Sovereign Marine & General Insurance Company Limited
('Sovereign')?
5 Who will be
affected by the Pool Scheme?
6 Why have I
been sent the letter dated 10 October 2007?
7 Has my broker
been made aware of this development?
8 What should I
do if I cannot trace any involvement with WFUM?
9 How will
reinsurance obligations be affected under the Scheme?
10 Why have
Sphere Drake reconvened their Creditors Meetings now?
11 Is
Municipal General Insurance Ltd (MGI) included in this Pool
Scheme?
12 Could a
Scheme Company revert to run-off once the Scheme has
commenced?
13 Does
the Pool Scheme cover Employers' Liability and other compulsory
insurance policies?
Please also refer to the Scheme FAQs.
These FAQs provide important information to Creditors in relation to
the WFUM Pools schemes.
In addition section 8 of the Explanatory Statement includes a number of
questions and answers: this document is held on the Scheme
documentation page of the website.
1 What are the WFUM Pools?
Willis Faber
(Underwriting Management) Limited ('WFUM'), Devonport Underwriting Agency
Limited ('DUAL') and Willis Faber & Dumas Limited ('WFD') formerly
underwrote and / or managed insurance business on behalf of a number of
insurance companies. The 16 companies that were part of the WFUM
Pools are listed on the WFUM Pools
Companies page. These are referred to as the 'WFUM Pools
Companies'.
For the avoidance of doubt, Municipal General Insurance Limited's
('MGI') (insolvent) share of DUAL is handled by MGI's Scheme Administrator
and is subject to its Scheme of Arrangement. MGI only participated on the
DUAL pool and is not included in this Pool Scheme. Refer to Question
11 for details relating to MGI.
The company with the largest participation (approximately 50% of the
estimated liabilities) in the WFUM Pools is Sovereign Marine & General
Insurance Company Limited ('Sovereign') which is insolvent. Additionally,
some of the other companies in the WFUM Pools have been in run-off for a
number of years.
A brief description of the business written by the WFUM Pools is
available on the WFUM
Pools Scope and Stamps page.
The WFUM Pools stopped accepting new insurance and reinsurance risks in
1991, since which time they have been in run-off.
PRO Insurance Solutions Limited ('PRO') is the pool run-off manager and
has administered the WFUM Pools business since 1998.
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2 What is a Scheme of Arrangement?
A
Scheme of Arrangement is a compromise or arrangement between a company and
some or all of its creditors or any class of them entered into pursuant to
section 425 of the Companies Act 1985 of England & Wales, which
becomes legally binding on a company and its creditors or any class of
them, if:
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- a majority in number representing not less than 75% in value
of the creditors or class of creditors present and voting in
person or by proxy, vote in favour of the Scheme of Arrangement at
a meeting or meetings to be convened with the permission of the
Court; and
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- the Court subsequently sanctions the Scheme of Arrangement;
and
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- an office copy of the order of the Court to that effect is
delivered for registration to the Registrar of Companies.
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3 What is the "WFUM Pools Scheme"? Is this a solvent
Scheme?
16 Participants of the WFUM Pools proposed Schemes of Arrangement
pursuant to section 425 of the Companies Act 1985. 14 of the proposed
schemes were sanctioned by the High Court of Justice on 17 September 2007.
Regarding one of the remaining companies, the Sphere Drake Insurance
Limited scheme was sanctioned by the High Court of Justice in England and
Wales on 5 November 2007. Together, these schemes are referred to as the
WFUM Pools Scheme. The company with the largest share of the pools,
Sovereign, is insolvent and together with its solvent subsidiaries,
Sovereign UK and Greyfriars, it makes up approximately 50% of the WFUM
Pools. The other 12 WFUM Pools companies are solvent.
The Pool Scheme exit route, implements each of the 15 schemes
simultaneously, thereby avoiding fragmentation of the Pool, reducing costs
and providing earlier payment for Scheme Creditors than would be possible
if run-off had continued or if Sovereign went into a scheme alone.
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4 What is the position of Sovereign Marine & General
Insurance Company Limited (‘Sovereign’)?
In 1997, Sovereign became insolvent and in January 2000 it implemented
a Scheme of Arrangement (‘the Original Scheme’). Under the Original Scheme
Sovereign has continued to agree claims in the normal course and has made
“scheme payments” on a pro-rata basis to creditors with “Established
Scheme Liabilities”. The current scheme payment percentage is 40%.
Sovereign has reached a point with its reinsurance collections and
asset realisations where the Scheme Administrators believe that it is time
for it and its subsidiaries to enter into a “closing” Scheme. This
involves setting up a mechanism to agree the values of claims submitted by
policyholders. The value of these claims would then be applied to the
reinsurance programme. This would enable valuation statements to be
prepared on a net basis for policyholders who are also reinsurers. Once
these amounts are known, Sovereign UK and Greyfriars will pay Agreed
Claims, less a discount for time value, in full (after applicable set-off)
and distribute any surplus assets to Sovereign. In turn final dividends
will then be paid by Sovereign and Sovereign formally wound up.
A copy of the latest report to Sovereign's creditors issued by the
Scheme Administrators may be viewed and downloaded from the Important
Information page. Return to the Top of
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5 Who will be affected by the Pool
Scheme?
You will be affected by the Pool Scheme if you
have a claim against one or more of the WFUM Pools Companies in respect of
insurance business written by or on behalf of the WFUM Pools Companies
which is included within the Pool Scheme.
All of the business
of Sovereign Marine & General Insurance Company Limited ("Sovereign"),
and that of its two solvent subsidiaries (Greyfriars Insurance Company
Limited and Sovereign Insurance (UK) Limited) will be included. In the
case of the remaining solvent WFUM Pools Companies, all liabilities
to insureds, reinsureds and brokers arising out of the WFUM Pools, except
for any liabilities in respect of UK compulsory insurance, will be
included.
To help you identify business included within
the Pool Scheme, you can obtain a user name and password for the
secure data website from PRO, which will enable you to access your own
policy and unpaid claims data as recorded on PRO's systems. Please contact
PRO via the Contacts
page.
Business to be included in the Pool Scheme is identified in the WFUM
Pools Scope and Stamps page on this website. Further information is
also included in the Scheme Document which can be viewed on the Scheme
documentation page on this website.
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6 Why have I been sent the letter dated 10 October
2007?
You have been sent this letter because PRO’s records
in relation to the WFUM Pools show that you, or those that you represent,
have in the past held a policy issued by some or all of the WFUM Pools
Companies in respect of WFUM Pools business. If you are uncertain as to
your position you should speak to your broker or other professional
adviser or contact PRO via the Contacts page.
See also Question 7.
The letter gives notice of the Scheme Effective Date and Scheme
Bar Date and recommends actions that Scheme Creditors should take now.
Other letters sent by PRO in relation to the WFUM Pools are as
follows:
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- A letter dated 02 December 2005 to:
Give early notice
about the proposed scheme;
Establish a dialogue and exchange
contact details;
Tell scheme creditors how to get more
information about the proposed scheme. |
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- A “Practice Statement letter” dated 20 January 2006 advised
creditors that the WFUM Pools were seeking leave to convene
meetings of creditors to vote on the Scheme proposals.
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- A “Leave to Convene letter” dated 30 June 2006 notified
creditors that leave to convene the Creditor Meetings had been
granted by the court and explained the basis of classes of
creditor for voting purposes.
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- Notice of the “Creditor Meetings” was issued to Scheme
Creditors on 31st July 2006.
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7 Has my broker been made aware of this
development?
Where PRO has addresses, all known brokers or
intermediaries whom PRO believes may have acted for relevant Scheme
Creditors in placing business have been informed of developments relating
to the WFUM Pools.
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8 What should I do if I cannot trace any involvement with
WFUM?
You can access your secure area on the website and
review the data presented by PRO. If no data is present then you should
contact your broker or intermediary who should be able to advise you of
any involvement you may have with the WFUM Pools. You can also contact PRO
using the WFUM Pools helpline, details are available on the Contacts
page.
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9 How will reinsurance obligations be affected under the
Scheme?
Scheme Claims valued under the Scheme will be used to establish outward
reinsurance claims values for set-off with Scheme Creditors who also
reinsure the WFUM Pools.
The reinsurance claims will be discounted to reflect the time value of
money. Undiscounted Agreed Claims will be processed through the
reinsurance programme and discounting, at the rates set out in the
Estimation Methodology, will be applied to the resulting value where
appropriate. Scheme Creditors which are reinsurers will also be given the
opportunity to review and, if necessary, dispute the calculation of the
reinsurance claims against them. However, this review and dispute does not
extend to challenging the valuation of the inwards claims values that have
become binding or such values being applied to contracts by which the
Scheme Company is reinsured in respect of such agreed claims for the
purposes of set-off.
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10 Why have Sphere Drake reconvened their Creditors
Meetings now?
The two Meetings of the Scheme Creditors
of Sphere Drake to vote on its proposed Scheme – namely:
1) the Meeting of its Scheme Creditors in
relation to their Scheme Claims other than IBNR claims; and
2) the Meeting of its Scheme Creditors in
relation to their IBNR claims,
were opened on 27 October 2006 but
were adjourned, prior to any votes being taken (the “Original Meetings”).
An adjournment was called because Sphere Drake had received notification
of several claims at levels which were markedly higher than the previously
advised claim values suggested and which, therefore, gave rise to issues
which Sphere Drake wished to seek to resolve with the Scheme Creditors
concerned prior to holding the vote. Following the Original Meetings, PRO
and Sphere Drake worked with the Scheme Creditors concerned to identify
and resolve the issues which had arisen. Sphere Drake has been able to
reach a commercial resolution with each of those Scheme Creditors and they
will no longer be submitting votes at the Meetings.
Sphere Drake
is therefore reconvening the Original Meetings to be held on Friday 19
October 2007 commencing at 11.00am with registration from 10.00am. (the
“Reconvened Meetings”).
The venue for the Reconvened Meetings is:
The offices of Sidley Austin LLP
Woolgate Exchange
25
Basinghall Street
London EC2V 5HA
England
A copy of the
letter giving notice of the Reconvened Meetings and explaining how voting
forms may be submitted is available on the Important
Information page. Please contact PRO for further information.
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11 Is Municipal General Insurance Ltd (MGI) included in
this Pool Scheme?
MGI is the subject of its own Scheme of
Arrangement and is not included in the WFUM Pools. Queries relating to MGI
should be directed to the Scheme Administrators:
· Post:
MGI, Frensham Suite, Friary Court, 13 - 21 High Street, Guildford GU1
3DG
· E-mail: Mike.Suckling@MGI-Ltd.co.uk
·
Telephone: 01483 303 176
· Website: http://www.mgi-ltd.co.uk/
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12 Could a Scheme Company revert to run-off once the
Scheme has commenced?
No, the Scheme does not include a
clause allowing the Scheme Companies to “revert to run-off”.
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13 Does the Pool Scheme cover Employers' Liability
and other compulsory insurance policies?
In respect of the
solvent Pool Companies other than Sovereign Insurance (UK) Limited and
Greyfriars Insurance Company Limited it is not intended to crystallise
claims under UK compulsory insurance policies in the Scheme of
Arrangement. They will therefore be dealt with outside the scope of
the Pool Scheme in the normal way. To the best of their knowledge and
following due enquiry, the directors of Sovereign Insurance (UK) Limited
and Greyfriars Insurance Company Limited do not believe that either
company has any liabilities in respect of UK compulsory
insurance.
As Sovereign Marine & General Insurance Company
Limited is an insolvent company all of its liabilities in respect of UK
compulsory insurance will be subject to the Pool Scheme, although Scheme
Creditors whose claims against Sovereign which are protected by virtue of
the Policyholders Protection Act 1975 will, subject to eligibility, still
be entitled to receive payments from the Financial Services Compensation
Scheme.
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