UK P&I Club Announces Reorganisation
The UK P&I Club announced today [Mar.23] that it is reorganising its structure including its Bermuda operation to establish UK Europe as the sole provider of direct insurance to UK Club members.
By reducing the number of separately regulated insurers from two to one, the UK Club aims to streamline governance, reduce compliance costs and manage more efficiently the Club’s solvency capital requirements whilst meeting the impending Solvency 2 regulations for insurers in the European Union.
Under the new structure, the Bermuda-based UK Club will cease to write direct insurance business.
Its existing direct business will transfer to UK Europe. UK Bermuda will become the reinsurer of UK Europe.
It will continue to be the holding company controlled by the Club’s Members, ie those shipowners whose vessels are insured by the Club.
The reorganisation will not affect UK Club Members’ terms of entry, cover or premium. They will continue to be Members of UK Bermuda but will be insured by UK Europe.
The new structure will take effect from February 2013 and so does not impact Members in the 2012 policy year. The valued relationships between Members, the Club and its Managers will continue unchanged as will the scope of services provided.
At the present time, many Members are insured directly by UK Bermuda through its respective branches in the UK, Hong Kong, Singapore, and Japan.
However, a substantial number of Members are insured by the wholly owned subsidiary, UK Europe. Both UK Bermuda and UK Europe are reinsured by the UK Club’s wholly owned subsidiary International P&I Reinsurance Company [IPIR].
Under the new structure UK Bermuda will cease to write direct insurance business. Its existing direct business will be transferred to UK Europe.
UK Bermuda will continue to be the holding company, controlled by its Members, and will also become the reinsurer of UK Europe. IPIR will cease underwriting while UK Europe will establish new branches in Hong Kong, Japan and Singapore.
The transfer of liabilities from UK Bermuda to the head office UK Europe will be carried out by a legal process known as a Part VII transfer under the terms of the Financial Services and Markets Act 2000 in the UK.
Under the terms of the Act, the transfer process is supervised by the English High Court together with the UK Financial Services Authority and an appointed ‘independent expert’.
The Bermuda Supreme Court has a supervisory role in the transfer of interests. In addition, the transfer of liabilities of the other branches will be supervised by their local Asian regulatory authorities.
The restructure aims to take effect in February 2013 and so does not impact Members in the 2012 policy year.
However, the preparations have a timeline running through 2012 and early 2013 which incorporates various aspects of consultation, review, documentation and legal oversight.
In broad terms, this process features six steps. The Club has commenced the first phase which consists of detailed planning, discussions with regulators and the appointment of an independent expert.
The independent expert’s role is to assess the effects of the proposed transfer and identify whether any parties are likely to be disadvantaged by it.
Preparation of legal documents, completion of the independent expert’s report and the more detailed involvement of regulators will constitute the second phase.
A preliminary court hearing and a consultation period will be the third and fourth steps and after about eight weeks, there will be the final court hearing. The final stage will be the transfer, to become effective 20 February 2013.
Hugo Wynn-Williams, Chairman of UK Club managers, Thomas Miller, has assured Club Members that the Club will be ready for Solvency 2 when it achieves its planned implementation date of January 2014. He states:
“The Club continues to make significant and substantial progress in preparations for the implementation of Solvency 2. In that process the Club identified that a reduction in the number of regulated entities delivers a number of benefits including streamlined governance, reduced compliance costs and efficient management of the Club’s solvency capital requirements.
“Our aim is to have completed this restructure by 20 February 2013, the anniversary date for all P&I Members’ insurance arrangements. This is comfortably ahead of the earliest anticipated implementation date for Solvency 2 of January 2014.”
