KWELM Creditors Okay Accelerated Runoff Scheme

KWELM Creditors Okay Accelerated Runoff Scheme

NU Online News Service, Feb. 5, 1:09 p.m. EST?KWELM insurance companies--the insolvent London-based liability insurer that did most of its business in the United States--said its creditors voted last week to approve an arrangement to wrap up the insurance run-off process nine years ahead of an earlier plan's projections.

The firm said that the overwhelming approval of the early closure program means creditors can receive the bulk of the $1.3 billion held for distribution far sooner than the scheme that was first set in place. Higher amounts of claims payments were also projected.

Creditor voting, KWELM said, took place in London in a series of meetings last Thursday.

KWELM companies are subsidiaries of the failed London United Investments plc. and include Kingscroft Insurance, Walbrook Insurance, El Paso Insurance, Lime Street Insurance and Mutual Reinsurance.

The insolvent companies specialized in U.S. casualty, professional indemnity and other liability insurance business, which was principally written through HS Weavers (Underwriting) Agencies Ltd. Over 90 per cent of the KWELM assets and liabilities are in U.S. dollars, and most of the policyholders are based in the United States, KWELM said.

According to the company, the early closure would involve payment of a substantive distribution to creditors late in 2005 or early 2006, subject to the level and complexity of further claims received. The original outline timescale for the runoff extended beyond 2015.

KWELM said the proposals also foresee a small ultimate distribution some years later, the size of which would depend on the final level of set-off, the amount of reinsurance collected, the realization of remaining assets, the value of total liabilities and costs incurred in the final stages of the run-off.

Following court approval of the plan, the scheme administrators expect it to become effective in early April.

Under the scheme, creditors must submit details of any outstanding claims and supporting evidence by a bar date, which is expected to be this Sept. 29. Creditors can lodge their claims through the KWELM Web site from mid-April.

Chris Hughes and Ian Bond, the scheme administrators responsible for the run-off of the businesses, say that "establishing a bar date for submitting claims starts a process to provide certainty as to the value of outstanding and contingent claims. As a result, we will be able to distribute the bulk of the assets to the creditors far earlier than under the original scheme."

According to the administrators, approval of early closure offers creditors the prospect of receiving total payments ranging between 58 percent and 76 percent of sums due. That compares to average distributions of 46 percent to date. The potential payout is substantially higher than expected when the original scheme was put in place in 1993.

Total funds recovered for distribution to creditors now exceed $3.1 billion, with total ultimate liabilities estimated at $5.8 billion, including a $1.2 billion special margin.

A tenth annual report to KWELM creditors will be made available in May, it was announced.

KWELM said most of the policies involved were sold between 1972 and 1990. Copies of the scheme document are on the KWELM Web site at www.kwelm.com, or can be obtained from the Creditor Help Desk. U.S. callers can dial 011 44 20 7645 4991.

KWELM said the courts have approved the use of a CD ROM to circulate the lengthy early closure proposals to interested parties. The administrators said they believe this method saves around 20 tons of paper and $300,000 in costs.