Downlands Liability Management

FAQ

To help you to understand the Transfer proposals and the implications for you, further explanation is provided below by clicking on the following links.


(i) More about the companies and the business to be transferred

Who is The Hartford Group?

The Hartford Financial Services Group, Inc., usually known as “The Hartford”, is a US-based Fortune 500 investment and insurance company. It is the 12th-largest property and casualty company in the United States and has its headquarters in Hartford, Connecticut. It acquired Excess in 1973 and wrote business in the UK and Europe through various branches including Hart Re, the UK branch of its subsidiary, Hartford Fire Insurance Company ("Hartford Fire").

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What business was written by Excess?

Excess wrote many different lines of insurance and reinsurance business in the London market and through overseas branches and agencies for nearly one hundred years from 1894. The business has been in run-off since 1992. Excess also wrote a portfolio of UK employers’ liability business between c.1908 to 1991. All known employers’ liability policies written by Excess are included on the database held by the Employers’ Liability Tracing Office (“ELTO”).

Traditionally Excess operated through brokers who typically issued policies direct to policyholders. It is likely therefore that you will have primarily dealt with a broker or other intermediary in relation to any policies that you hold that were issued by Excess.

It is proposed that all of the business written by Excess will be transferred to HFPI.

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What business is included in Hart Re?

Hart Re was established in 1993 to enable the Hartford Group to continue writing some of the non-US reinsurance business which had previously been written by Excess. Hartford Fire also established branches in Paris, Munich, Milan and Madrid, which wrote pure reinsurance business. These branches closed in 2001/2. For the avoidance of doubt, the European branch business (and certain other reinsurance business originally written directly by Transatlantische Ruckversicherungs AG (“Transatlantische”) and by Transatlantische and Excess through Excess Underwriting Management GmbH, which was subsequently assumed by Hartford Fire) will not be included within the Transfer.

It is proposed that all of the business written by Hart Re will be transferred to HFPI. If you are uncertain whether or not the Transfer will affect you, please contact DLM whose details are provided on the contact details page of this website.

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What business of L&E will be included in the Transfer?

The Transfer will include certain business originally written by L&E for which the ultimate financial responsibility resides with the Hartford Group. This is referred to as the L&E Business in this website and specifically relates to business written in pooling arrangements through the following underwriting agents:

- B D Cooke and Partners between 1948 and 1968;
- HS Weavers (Underwriting) Agencies between 1972 and 1976;
- Tower Underwriting Management (also known as “Old Tower”) between 1967 and 1972;
- Highlands Underwriting Agents (also known as “Tower X”) between 1973 and 1978; and
- Westminster Marine Insurance Managers between 1960 and 1977.

In addition, L&E also wrote some business in the London market in its own name. In terms of the L&E Business to be included as part of the Transfer, written before 1 January 1992, this generally relates to direct US and reinsurance business written from the 1940’s to the 1970’s.

It is proposed that all of the L&E Business will be transferred to HFPI. If you are uncertain whether or not the Transfer will affect you, please contact DLM whose details are provided on the contact details page of this website

The contractual arrangements between Aviva and the Hartford Group are being transferred and unwound so that legal and beneficial title to the L&E Business will reside with HFPI following the Transfer.

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Who is HFPI?

The Transferee, HFPI, is a UK-incorporated member of the Hartford Group. It is regulated in the UK by the Prudential Regulation Authority ("PRA") and the Financial Conduct Authority ("FCA"). It was incorporated in 2006 and began underwriting, through brokers, in November 2007 principally writing directors and officers liability and related insurance. The business has been in run-off since 2012.

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(ii) The Transfer

What is a Part VII Transfer?

“Part VII Transfer” is the name sometimes given to a transfer of insurance business under Part VII of the Financial Services and Markets Act 2000. It is a statutory scheme whereby the liabilities of one insurer (or a number of insurers) and corresponding assets are transferred to another entity. The process that must be followed is stringent to ensure that policyholders are protected. To be effective the Transfer Scheme is required to be approved by the Court. In considering a Part VII Transfer Scheme, the Court will take into account the views of the PRA, the FCA and the Independent Expert, whose appointment must be approved by the PRA and the FCA, and any objections made by affected parties.

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Why is the Hartford Group doing the Transfer?

The Transfer will enable the Hartford Group to simplify and consolidate its legal structure in the UK in line with existing operational, administrative and functional arrangements. All of the portfolios of business that will be included in the Transfer have been managed by DLM for many years. By combining all of its UK-based run-off liabilities into HFPI instead of operating through four separate companies, the Hartford Group will be able to reduce costs and achieve greater capital efficiency in preparation for the new European capital regulations, Solvency II. As part of the simplification of the Hartford Group, it is currently intended that Excess will be wound-up by way of a members’ voluntary liquidation following the Transfer and Hart Re, the UK branch, will be closed.

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Who is paying for the Transfer?

The cost of the Transfer will be borne by the Hartford Group. No costs to accomplish the Transfer will be passed on to policyholders.

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What is the Transfer Scheme?

This is the legal document which governs the transfer of business and sets out the precise terms of the Transfer. The Transfer Scheme is subject to Court approval. We have included a summary of the Transfer Scheme in Section 3 of the Explanatory Booklet. You can download a full copy of the Explanatory Booklet from the further information page of this website. If you would like a paper copy posted to you, then please contact DLM at the details provided on the contact details page of this website.

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When will the proposed Transfer happen?

If the proposals are approved by the Court, then we expect that the Transfer will take place at 00:01 on 15 October 2015 (the “Effective Time”).

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(iii) Effects of the Transfer

What will be the effect of the Transfer Scheme?

A summary of the key terms of the Transfer Scheme is set out in Section 3 of the Explanatary Booklet which can be downloaded from the further information page of this website. In broad terms, the effect of the Transfer Scheme will be that the Transferors’ rights and obligations under their respective policies subject to the Transfer will be transferred, without alteration, to HFPI. Any rights or obligations that you have under such policies will remain unchanged, but following the Transfer will instead be exercisable against or owed to HFPI.

The Transfer will include all corresponding assets, including reinsurance assets, matching the insurance and reinsurance policies to be transferred.

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What changes will we notice?

The Transfer will not affect how policies or claims are dealt with in any way or change any terms and conditions of your policies. There will be no need to re-issue any policy documentation. There will be no changes to the way in which your policy is administered and you should continue to contact DLM, your current broker or other intermediary for any policy or claim related queries in the usual way. This applies equally to policyholders and cedants of the Transferor and Transferee entities.

In addition, in relation to employers’ liability policies written by Excess, individual claimant’s rights under the Third Parties Rights Against Insurers Act 1930 are not affected by the Transfer.

The main change relating to the Transferor entities is that, following the Transfer, the Transferor brands will be replaced by the HFPI brand.

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What will happen to claims?

Claims will be processed and paid in the usual way up until the Effective Time of the Transfer. After the Transfer, claims will continue to be processed in the usual way but will be paid by HFPI in place of the previous Transferor companies. There will be no change in the way that claims are processed in relation to HFPI.

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How will the Transfer affect the security of my policy?

The legal and regulatory framework relating to an insurance business transfer proposal seeks to ensure that policyholders’ interests are safeguarded and the security and benefit to all groups of policyholders of the Transferors and the Transferee will not be adversely affected. This includes detailed consultation with the PRA and FCA and an independent assessment by the Independent Expert of how the Transfer will impact different groups of policyholders with differing rights, benefits and interests. The appointment of the Independent Expert has been approved by the PRA and the FCA.

A summary of the Independent Expert’s report may be obtained, free of charge, from the further information page of this website; his overall conclusion is as follows: “I conclude that the security provided to policyholders would be equivalent or improved after the Transfer, that no group of policyholders would be adversely affected to a material extent by the Transfer, that the level of customer service provided to policyholders would be unaffected by the Transfer, and that therefore there is no reason that the Transfer should not go ahead.". The full report of the Independent Expert may be obtained, free of charge, from the further information page of this website or by contacting DLM at the contact details provided on the contact details page of this website.

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Will employers’ liability policies of Excess continue to be traceable through ELTO?

Key policy details relating to all known employers’ liability policies written by Excess are included on the database held by ELTO, through which Excess’s insurance coverage can be traced. Excess will continue to be traceable in the same way through this database after the Transfer whereby DLM will handle any future claims on behalf of HFPI.

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I am based in the US – how does the Transfer affect me?

If you are based in the US, the Transfer, as described in this website, applies to your policy also.

In addition, if you have a US surplus line insurance policy with Excess, the following information is relevant to you. As part of the Transfer, the US surplus lines business of Excess will be transferred to HFPI. Excess is listed as an eligible surplus lines insurer by the International Insurers Department of the National Association of Insurance Commissioners (the “IID”) and currently maintains a US surplus lines trust (the “Excess Trust”). The assets maintained in the Excess Trust will not transfer to HFPI under the Transfer Scheme. However, HFPI has applied to the IID for listing as an eligible surplus lines insurer and will maintain its own US surplus lines trust (the “HFPI Trust”). HFPI has requested that such application to the IID be approved simultaneous with the Effective Time of the Transfer. Following the Effective Time of the Transfer, the Excess Trust will terminate. Assets securing the liability for your policy will be deposited by HFPI in the HFPI Trust. Accordingly, the HFPI Trust is expected to provide equivalent security for relevant policyholders to that previously provided by the Excess Trust, in each case subject to their terms and to the usual jurisdiction of the US Courts.

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I am not based in the UK or the US – how does the Transfer affect me?

If the Court approves the Transfer, its decision will bind all policyholders as a matter of English law and will be recognised in all other EEA jurisdictions (subject to the PRA notifying the regulator in other relevant EEA states and certain rights of the relevant EEA regulators to refuse to consent to the Transfer).

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How will the Transfer affect reinsurers and retrocessionaires?

Notification of inwards claims will continue to be made in the same way as before the Transfer. There will be no change to the claims agreement process or the calculation, cession and collection of reinsurance recoveries. Set-off rights that exist prior to the Transfer will be preserved. No action is required by reinsurers and retrocessionaires.

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(iv) The Independent Expert

Who is the Independent Expert?

The Independent Expert is Michael Barkham of Ernst & Young LLP. Mr Barkham is a Fellow of the Institute and Faculty of Actuaries and a Fellow of the Society of Actuaries in Ireland. He is certified to act as a Signing Actuary for Lloyd’s of London regulatory opinions, as well as to sign Irish, Bermudan and Singaporean regulatory opinions. He is a Partner in the European Actuarial Services practice of Ernst & Young LLP, and has more than 20 years’ experience in general insurance.

Prior to joining Ernst & Young LLP in 1994, he was employed by a large London market insurance entity. Mr Barkham has skills in all areas of general insurance actuarial work (including reserving, capital, pricing and transactions) and was involved in the setting up of Equitas. Mr Barkham has previously acted as Independent Expert for other insurance business transfer schemes and has led a project that involved the provision of actuarial support to one of the largest Part VII transfers to have taken place to date.

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What does the Independent Expert do?

The Independent Expert has been appointed under s109 of the Financial Services and Markets Act 2000 to report his opinion on the likely effect of the Transfer proposals on policyholders and other key stakeholders of the Transferor and Transferee entities including whether any of their interests could in any way (either directly or indirectly) be adversely affected by the Transfer. His appointment has been approved by the PRA and FCA. He is not an advisor to any company involved in the Transfer, but is a person independent of the parties involved whom the PRA and FCA consider has the necessary skills to assess the effect of the Transfer.
His primary role will be to consider the Transfer and to report his opinion to the Court. His report must be impartial, based on a thorough review of the proposals and the businesses of the Transferor and Transferee entities and in a form that is approved by the PRA and FCA. All relevant companies have provided Mr Barkham with access to key staff and any information he has requested.

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Who pays the Independent Expert?

The Independent Expert is paid by the Hartford Group; however he has an overriding duty to the Court, to assist the Court and to give the Court independent expert evidence on the Transfer.

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What does it mean that he is independent?

In accordance with the Financial Services and Markets Act 2000, Mr Barkham’s overriding duty of responsibility is to the Court and not to the companies involved in the proposed Transfer. His report must be impartial. His appointment has been approved by the PRA and FCA, who were provided with evidence to demonstrate his independence from the parties to the Transfer.

A full copy of his report can be downloaded from the further information page of this website. The Independent Expert may also prepare a supplement to his report prior to the Court hearing in relation to any matters which may have changed or have been updated since his first report. Any supplemental report will be made available on the further information page of this website. If you would like a paper copy of any of the reports posted to you then please contact DLM at the details provided on the contact details page of this website.

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(v) More about the Transfer process

Why are you writing to me?

In order for the Transfer to take place, a rigorous legal and regulatory approval process must be followed. Policyholder protection is paramount and, as part of the legal process, notification to policyholders, claimants and other key stakeholders is required. The manner in which the formal notifications of the Transfer are being issued has been discussed with the PRA and FCA, and approved by the High Court.

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Have the FCA and PRA reviewed the Transfer Scheme?

Under the Financial Services and Markets Act 2000, the ultimate decision as to whether to approve a Part VII transfer lies with the Court. The PRA, in consultation with the FCA, will be responsible for specific regulatory functions connected with Part VII transfer applications including approval of the appointment of the Independent Expert and the form of his report, approval of the press notices and notification letters sent to policyholders and other affected parties and the provision of relevant regulatory certificates as required by legislation.

Both the PRA and the FCA have the right to make written and oral representations to the Court, including providing the Court with reports setting out their views on the proposed Transfer Scheme, which the Court will take into account in deciding whether the Transfer Scheme is fair and whether policyholders’ interests are safeguarded.

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Have the regulators in other countries been consulted?

Yes. In accordance with the Financial Services and Markets Act 2000, relevant regulators in the EEA and the regulator in Switzerland have been consulted. The Connecticut Insurance Department, the regulator for the Hartford Group, has also been consulted.

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Can I vote on the Transfer?

There are no voting procedures in relation to a Part VII transfer and you are not required to take any action in relation to the Transfer. If the Transfer is approved by the Court, all affected policies will automatically transfer to HFPI. However, you do have a right to object to the Transfer proposals and for your objection to be heard by the Court. Please refer to the next question for details on what to do if you wish to object.

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What if I have an objection to the Transfer?

We hope this website provides you with sufficient information to allow you to understand what is being proposed, and answer any questions that you may have. However, if you believe that you will be adversely affected by the Transfer, you have the right to make written representation and/or appear at the Court hearing to approve the Transfer.

The Court hearing is scheduled to take place on 13 October 2015 at the Rolls Buildings, Royal Courts of Justice, 7 Rolls Buildings, Fetter Lane, London EC4A 1NL, UK. If you wish to make representations at the Court hearing but are not able to attend the hearing, you may do so either by calling or writing to DLM at the contact details provided on the contact details page of this website or through legal representation. Alternatively, you may write to the solicitors of the Hartford Group at the address details given below.

Any person who intends to appear at the Court, or to make representations in writing, is requested to notify the Hartford Group’s solicitors as soon as possible and ideally at least 2 days before the Court hearing to Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London, EC4Y 1HS or to DLM at the address provided on the contact details page of this website.

If you raise an objection about the proposed Transfer, we will respond in writing within 5 working days, either to respond to your objection, or to acknowledge receipt of your objection. If we are simply acknowledging receipt of your objection, we will tell you in our letter when we will respond in full.
We will keep a record of all the objections received and will provide these to the Court, the PRA and the FCA, along with a copy of our responses. If you make your objection in writing, this will be included in the information supplied to the Court. Notifying us of your objection in advance of the Court hearing does not affect your right to attend and make your objection at the Court hearing itself, which you will still be able to do.

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Where and when will the Court hearing take place?

The Court hearing is scheduled to take place on 13 October 2015 at the Rolls Buildings, Royal Courts of Justice, 7 Rolls Buildings, Fetter Lane, London EC4A 1NL, UK. It is possible that the hearing date may change. Anyone wishing to attend the hearing should check the key dates page of this website which will be updated should the hearing date change.

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Who can attend?

The Court hearing will be attended by representatives of the companies involved, and the Independent Expert. The Transferor and Transferee companies will be jointly represented at the Court hearing by a barrister. The PRA and FCA also have the right to attend.

The Court hearing is open for members of the public to attend. If you have an objection to the Transfer because you believe you will be adversely affected by it, then you can attend (in person or by a legal representative), and make your objection at the Court hearing.

If you do intend to appear or to be represented at the Court hearing, you are requested to notify the Hartford Group’s solicitors as soon as possible and ideally at least 2 days before the Court hearing to Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London, EC4Y 1HS or to DLM at the address provided on the contact details page of this website.

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What will happen at the Court hearing?

The Judge will review whether all of the legal procedures for completing a Part VII transfer have been followed correctly. The Judge will also review the witness statements and evidence presented by the companies in support of the proposed Transfer, and consider the reports of the Independent Expert, the PRA and the FCA.

Time will be allocated to hear any objections put forward (whether in writing or in person) by affected policyholders or any other person who alleges that they would be adversely affected by the proposals.

The Judge must decide whether or not it is appropriate to approve the Transfer Scheme, taking all of the evidence into account. If the Judge does approve the Transfer Scheme, then a Court Order is made which allows the Transfer Scheme to come into effect at the time specified in the Order.

The Court hearing is scheduled to take place on 13 October 2015 at the Rolls Buildings, Royal Courts of Justice, 7 Rolls Buildings, Fetter Lane, London EC4A 1NL, UK.

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Do I need to do anything?

You are not required to take any action in relation to the Transfer. If the Transfer is approved by the Court, all rights, liabilities and obligations under all of the affected policies will automatically transfer to HFPI along with any claims relating to those policies. There will be no need to reissue any policy documentation and all contact details will remain the same.

If you are happy with the proposed Transfer, you do not need to do anything. However, if you believe that you will be adversely affected by the Transfer, you have the right to object. Please see the response to “What if I have an objection to the Transfer?” above for details of the steps you should take if you wish to object.

It is possible that there may be other parties with an interest under your policy or policies with the Transferor or Transferee entities (for example, joint holders, assignees, subsidiaries or affiliates). If you believe that any other party may be affected by the Transfer in relation to any of your policies, please forward a copy of the Explanatary Booklet, which can be downloaded from the further information page of this website, on to them as soon as possible. Similarly, if you have assigned your policy to someone else, then please forward a copy of the Explanatary Booklet on to them.

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Where can I find out more information?

We have included information within this website to help you to understand the proposed Transfer Scheme. Further information about the Transfer, including the full terms of the Transfer Scheme and the full report of the Independent Expert, is available free of charge, from the further information page of this website.

If you have any other queries relating to the Transfer or would like hard copies of the Transfer documents to be sent to you, please contact DLM by:

- telephone helpline on +44(0)1903 836 822;
- email to HartfordPartVII@DownlandsLiability.com; or
- writing to Roland Jackson, Downlands Liability Management Limited, DLM House, Downlands Business Park, Lyons Way, Worthing, West Sussex BN14 9RX, United Kingdom.

The helpline will be open between the hours of 9.00 a.m. and 5.30 p.m. from Monday to Friday UK time. When calling the Transfer helpline number outside of these hours, please leave a short message stating the nature of your query and your contact details and DLM will endeavour to return your call within 48 hours (excluding Saturdays, Sundays and Bank Holidays). If you contact us by email or in writing, we will respond to you within 5 working days, either to respond to your query, or to acknowledge receipt of your query. If we are simply acknowledging receipt of your query, we will tell you in our letter when we will respond in full.

Any other general queries relating to your policy or claims should continue to be made using the contact details set out in your policy documents.

All future updates relating to the Transfer will be posted on the further information page of this website, including any changes to the date of the Court hearing and a copy of any supplemental report prepared by the Independent Expert.

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How will I know if the Transfer Scheme has been approved?

We will announce the outcome of the Court application on this website. If the Transfer Scheme is approved, it is expected to become legally effective on 15 October 2015 and all future communications relating to the business that has been transferred will be made by HFPI. If the Transfer is not approved, there will be no change to the legal entity with whom your policy is placed.

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