Zurich to Shift $2B of UK Legacy Employers’ Liability Policies to Catalina

Zurich Insurance plc has entered into an agreement with Catalina, a specialist acquirer of legacy insurance portfolios, to transfer its pre-2007 UK legacy employers’ liability policies to Catalina.

As of December 31, 2017, the portfolio comprised gross liabilities of USD$2 billion relating principally to industrial disease related claims, including asbestos.

George Quinn, Group chief financial officer said the sale of this portfolio reflects Zurich’s strategy to eliminate or reduce exposure to legacy lines of business and Zurich will continue this focus on “actively managing capital allocation to improve overall returns” in 2019.

The transaction will be completed in two steps. The first step will consist of a reinsurance agreement between Zurich Insurance and Catalina General Insurance, a Bermudan reinsurer. In a second step the policies and liabilities will be transferred to Catalina London Limited, a UK insurer.

The transfer excludes Zurich Municipal policies, International Programme policies and certain packaged policies.

This transaction is Catalina’s first since it announced the completion of a US$700 million equity capital raise in October which took its available equity capital commitments for transactions to $850 million. Total assets of Catalina pro forma for this transaction will be US$6.0 billion.

The transaction is subject to regulatory and court approvals, with the final transfer expected to occur within two years.

Zurich said that in the fourth quarter of 2018 upfront expenses related to the transaction are expected to lead to a small loss recognized in business operating profit, while over the full period to completion of the transfer of the policies the Group expects to achieve an overall positive contribution to the business operating profit.

The transaction is expected to have a negligible impact on Zurich’s Economic Capital Model (Z-ECM) capital position and a modest positive benefit to capital under the S&P model expected in the first quarter of 2019.

1 The transfer excludes Zurich Municipal policies, International Programme policies and certain packaged policies