10.1 What commercial benefit do I get from this Scheme in return for losing cover under my policies?
Please see section 4.5 for a list of advantages of the Scheme for Scheme Creditors.
10.2 What has been done to take soundings from policyholders and cedants affected by the Scheme?
Significant creditors of the Scheme Companies have been consulted on the proposed closure of the Pools Business. Although of course it has not been possible to speak to every creditor, many creditors, covering representative groups of the creditor population including most of the major creditors of the Scheme Companies, have been contacted and feedback from those Scheme Creditors has been taken into account in the design of the Scheme.
Additionally, the EAIC Scheme Administrators have undertaken a thorough consultation process with the EAIC Creditors' Committee. The Joint Scheme Administrators of ICS have similarly consulted with the ICS Creditors' Committee and taken account of the feedback received.
10.3 What happens if a Scheme is approved for some of the Scheme Companies, but not all of them?
If implemented, the Schemes would have the effect of concluding the run-off of those Scheme Companies' involvement in the Pools much sooner than would otherwise be the case.
In the event that EAIC's Scheme and ICS's Scheme were to be sanctioned by the Court in circumstances where one or more of the other Scheme Companies' Schemes were not to be so sanctioned, the EAIC and ICS Scheme Administrators would only continue to seek to make their respective Schemes effective if, having taken into account the position of the other Scheme Companies, they believed that to do so would be in the best interests of the creditors of their respective companies.
Further if the Schemes were not implemented for EAIC and/or ICS, the Existing EAIC Scheme and/or the Existing ICS Scheme, respectively, would continue in force without amendment. In the event that any of the other Scheme Companies' Schemes were not to be sanctioned by the Court, those Scheme Companies whose Schemes had been so sanctioned would need to consider whether it would be viable for their Schemes to become effective in those circumstances. In taking that decision, the Scheme Companies would consult with each other and would take their decision on the basis of what they considered to be in the best interests of the stakeholders (including their creditors) of their respective companies and in accordance with their duties as regulated risk carriers.
Additionally, in view of the distinct treatment (as described in section 5.19 above) afforded (by the combination of the Scheme and the deed poll) to the insureds under the employer's liability covers written by the five relevant solvent Scheme Companies (i.e. excluding Nippon Insurance Company of Europe Limited), the Court has directed that separate class meetings of those affected insureds should be convened to vote on the Scheme proposal. If and to the
Scheme in relation to that particular class of creditors, those employer's liability covers written by the affected Scheme Company concerned will be excluded from the Scheme but the Scheme will otherwise be unaffected.
10.4 What features does this Scheme provide to assist policyholders?
Every effort has been made to ensure that the Scheme treats Scheme Creditors fairly and addresses their potential concerns. As well as receiving direct feedback from creditors, the Scheme takes into account developments in recent solvent schemes. The pre-Scheme process (including the voting procedure) has been designed with creditor concerns in mind and the Scheme itself has a number of features which have been specifically included in response to creditors' comments. Some of these features include:
• Scheme Creditors were given early information on the intention to propose a scheme and were invited to obtain a username and Website password for their secure area of the Website;
• the Chairman of the Scheme Meeting will be an independent person;
• to assist Scheme Creditors in making their claim, Claim Forms may be accessed and completed online by way of the Website which contains a mechanism to allocate claims across the Scheme Companies;
• details of Insurance Contracts and claims data submitted by the Scheme Creditor at the voting stage will, if the Scheme Creditor so elects, be migrated by the Scheme Manager to Claim Forms to simplify submission of Scheme Claims;
• the Estimation Guidelines (used if the Scheme Creditor is unable to agree the value of its Scheme Claim with the Scheme Manager) are fully set out in the Scheme. Where the Scheme Actuary considers it is appropriate to do so, the Scheme Actuary may adopt a Scheme Creditor's own methodology for valuing relevant elements of Scheme Claims rather than rely upon the Estimation Guidelines;
• there will be an open exchange of submissions under the adjudication procedures; • there is a duty on Scheme Companies and the Scheme Manager to co-operate with
Scheme Creditors — thus mirroring the duty on Scheme Creditors;
• both the time at which this Scheme is to be proposed and the time limits within it are intended to make the process of claiming as easy as possible for Scheme Creditors; and • under the Scheme, the Scheme Manager is obliged to use its reasonable efforts to assist
Scheme Creditors with policy reconciliation should such assistance be requested by a Scheme Creditor upon reasonable prior notice to the Scheme Manager. Additionally, a helpline is available which Scheme Creditors can call if they have any enquiries about the Scheme or if they need help with completing their Claim forms. Please see page vi for details.
10.5 Are there any contingent fee arrangements for those with roles under the Scheme? No.
10.6 Is any non-Pools Business being included within the scope of this Scheme?
Yes — EAIC and City International Insurance Company Limited are including all of their business in the Scheme, which includes some non-Pools Business subject (in the case of EAIC) to certain business being excluded. Details of this non-Pools Business and of the excluded business are contained in Schedule 1 at page 61.
10.7 Will I have enough time to submit my claim?
There will be a 180-day period for submission of claims and supporting information from the date on which the Scheme becomes effective. You may amend or add to your Claim Form until 17:00 hours in the UK on the Bar Date at which point your Claim Form must be submitted and received by the Scheme Manager either on the Website or by e-mail, fax or post. In addition, you may access the Website and begin to work on and submit Scheme Claims before the Scheme becomes effective, giving you a lengthy period within which to submit claims information. Information submitted during the period prior to the Scheme becoming effective will be automatically inserted on your Claim Form if you so elect. The process of submitting claims information will be "opened" when the letter accompanying this document and giving notice of the Scheme meetings is sent to all known Scheme Creditors inviting them to contact PRO for a Website password and username to enable them to access their secure part of the Website. A copy of that letter is available on the Website. Therefore, as at the Bar Date, Scheme Creditors will have had a period of approximately 12 months within which to collate and present their Scheme Claims.
10.8 What happens to Unpaid Agreed Claims if I do not submit my claim by the Bar Date?
Even if a Claim Form is not submitted by a Scheme Creditor by the Bar Date, the Claim Form as made available by the Scheme Manager to the Scheme Creditor (which will include Unpaid Agreed Claims) will be deemed to have been submitted on the Bar Date. Scheme Creditors will not, therefore, lose their right to receive payment in respect of Unpaid Agreed Claims even if they do not submit a Claim Form by the Bar Date.
EAIC's and ICS Protected Policyholders are not affected by the Bar Date.
Scheme Creditors should note that, in relation to Unpaid Agreed Claims, in the months immediately prior to the implementation of the Scheme, the Scheme Manager has written to all brokers in order to seek to reconcile all relevant unpaid balances recorded on the books of the Scheme Companies. Where a broker has provided a broker reconciliation statement as requested, the Scheme Manager has sought to match those balances with those held on the Scheme Manager's systems. Any such matched but unpaid balances will be included on the Claim Forms uploaded onto the Website as Unpaid Agreed Claims.
Scheme Creditors should be aware that all unmatched unpaid balances (including where a broker has failed to respond and/ or provide a reconciliation statement as requested) will not automatically be included on the Claim Forms uploaded on the Website.
10.9 How can I be sure that my Scheme Claim will be valued fairly?
The data on the Claim Forms and the supporting evidence will be reviewed by the Scheme Manager. The Scheme Manager and Scheme Creditor have up to a maximum of 180 days,
seek mutually to agree an extension period with the Scheme Creditor. Both the Scheme Manager and Scheme Creditors have a duty to co-operate with each other in trying to reach a mutually agreed value for Scheme Claims.
If a Scheme Claim cannot be agreed on a consensual basis, it will be passed to the Scheme Adjudicator for determination. Each party can make submissions to the Scheme Adjudicator and see submissions made by the other.
10.10 What about discounting?
To reflect the time value of money, the Estimation Guidelines provide for discounting of future obligations back to the Bar Date. Details of the proposed discount factors can be found at Clause 5 of the Estimation Guidelines at Appendix B of the Scheme. However, if a Scheme Creditor's Net Ascertained Claim against a Scheme Company (with the exception of EAIC, ICS or Home) is not paid until after the expiry of the period of 12 calendar months from the Bar Date, a Scheme Company (with the exception of EAIC, ICS or Home) will pay interest to that Scheme Creditor on its Net Ascertained Claims at the rate and on the terms described in Clause 4.2.2 of the Scheme.
10.11 I am also a reinsurer. How does the Scheme apply to me?
Scheme Claims valued under the Scheme may be used to establish outward reinsurance claims values for set-off with Scheme Creditors who also reinsure the Pools.
The reinsurance claims will be discounted to reflect the time value of money. The undiscounted Agreed Claims may be processed through the reinsurance programme and discounting, at the rates in the Estimation Guidelines, will be applied to the resulting value where appropriate. Scheme Creditors which are reinsurers will also be given the opportunity to challenge the calculation of the reinsurance claims against them. However, this right to 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.
10.12 Since I cannot take Proceedings against the Scheme Companies to pursue my claims, how do I know they will follow the terms of the Scheme?
Although there is a general stay on Proceedings, a Scheme Creditor may take Proceedings against a Scheme Company if it fails to pay their Net Ascertained Claim in accordance with the terms of the Scheme.
For EAIC and ICS, the Scheme will be administered respectively by the EAIC Scheme Administrators and the ICS Scheme Administrators who are licensed insolvency practitioners. Their duties are as set out in the Scheme.
10.13 How independent are the people valuing my claim?
Your claim will initially be valued by the Scheme Manager, PRO. Although it is not independent, having carried out the run-off for the Pools since 1993, it is a professional and well-regarded run-off agent in the market. Where there are disputes relating to a Scheme Claim, they can be referred directly to the Scheme Adjudicator as explained in section 5.6 above.
The Scheme Actuary will advise and assist the Scheme Manager or Scheme Adjudicator as appropriate in relation to the valuation of Scheme Claims and the application of the Estimation Guidelines, as requested.
For the avoidance of doubt, none of the Scheme Adjudicator, Scheme Actuary, or the Scheme Manager has any contingent fee arrangements in place in respect of the operation of the Scheme.
10.14 When will I be paid?
The solvent Scheme Companies:
It depends. The Scheme includes the flexibility to make payment to creditors at an early stage; and as a general principle, payment by all Scheme Companies other than EAIC, ICS or Home must be made within 42 days of the relevant Valuation Statement becoming binding.
In relation to direct creditors (and all Scheme Creditors who are not reinsurers of a Scheme Company), it is feasible that payments could be made as early as 42 days after the Scheme becoming effective, should a claim be immediately submitted by the Scheme Creditor and agreed by the Scheme Manager after the Effective Date.
Where the Scheme Creditor is also a reinsurer of the Scheme Company, its Scheme Debts will be calculated with reference to the value of the Scheme Claims agreed by the Scheme Manager under the Scheme, which will mean that it will take longer for its Valuation Statement to be issued. However, the option to agree in writing a Net Ascertained Claim via a commutation with the Scheme Manager (and thereby shorten this process) is available at any point after the Effective Date. Amounts agreed by way of commutation will also be paid within 42 days of their agreement.
If Scheme Creditors fully utilise the available time set out in the Scheme to agree their Net Ascertained Claim, without invoking any of the adjudication processes or extending any time frames laid out in the scheme, then payment would be made by the Scheme Companies other than EAIC, ICS or Home approximately 8 months after the Bar Date — slightly earlier for direct creditors, slightly later for creditors who are also reinsurers.
Early submission of a Claim Form, enabling the Scheme Manager to begin the process of agreement prior to the Bar Date, could result in payment being made to you sooner.
EAIC:
Due to its insolvency as well as other factors, EAIC may need to review its Payment Percentage after the Bar Date. It will make payments of dividends later than the payments made by solvent Scheme Companies. The Scheme provides that EAIC's payments will be made up to the later of 90 days after either the relevant Valuation Statement has become binding or after the date on which the Payment Percentage has been adjusted.
ICS:
Creditors and E&A Pool Creditors later than the payments made by solvent Scheme Companies. The Scheme provides that where an ICS Payment Percentage has not been set by the ICS Scheme Administrators, ICS's payments will be made within 90 days after the relevant Valuation Statement has become binding. If an ICS Payment Percentage has been set, payment will be made as soon as practicable after the later of the date that the Valuation Statement has become binding or the date that the ICS Payment Percentage was set.
Payments to E&A Pool Participants will be made as soon as reasonably practicable after all payments to General Creditors and E&A Pool Creditors have been made.
Oberon Pool Claims will continue to be dealt with by St Paul Re pursuant to the Existing ICS Scheme, which will not be amended in this regard. No payments will be made by ICS in respect of such claims.
Home:
A Scheme Creditor's Net Ascertained Claim shall be eligible to be admitted to proof in the Home Liquidation, subject always to compliance by the Scheme Creditor with the provisions regarding the filing of claims contained in the Home Claims Procedure Order.
In short, Net Ascertained Claims will be admitted as agreed claims in the Home Liquidation, subject to (i) the Scheme Creditor having already filed a proof of claim in the Home Liquidation by the statutorily-imposed bar date of 13 June 2004; and (ii) any further rights of set-off which Home may have against the Scheme Creditor concerned arising out of non- Scheme contracts. The Scheme Creditor's entitlement (if any) to receive a distribution in the Home Liquidation in respect of its Net Ascertained Claim will, however, be governed by the provisions of New Hampshire insolvency law (including, but not limited to, the Home Claims Procedure Order).
10.15 What should I do now?
Scheme Creditors can begin to work on and calculate their Scheme Claims for voting purposes on the Website. Although values used for voting purposes are not binding in the Scheme itself, information submitted during the period prior to the Scheme becoming effective will be automatically inserted on your Claim Form if you so elect. In order to make this election, a Scheme Creditor should follow the instructions for completion of the Voting Form (a copy of which is included at Schedule 8, page 83 of this document). The process of submitting claims information will be "opened" when the letter accompanying this document and giving notice of the Scheme Meetings is sent to all known Scheme Creditors inviting them to contact PRO for a Website password and username to enable them to access their secure part of the Website. A copy of that letter is available on the Website. Therefore, as at the Bar Date, Scheme Creditors will have had a period of over approximately 12 months within which to collate and present their Scheme Claims.
The Claim Forms will be available for completion for a period of six months from the Effective Date, and this, coupled with the period during which the Website was available prior to the Scheme becoming effective, should, it is intended, be sufficient to enable Scheme Creditors to submit their Scheme Claims.
10.16 How can you find out more about the Scheme and ask questions? To find out more please either:
• visit the Website at www.englishandamericanpools.com; • e-mail the Scheme Manager at [email protected]; • phone the Scheme helpline on +44 (0) 1452 330 514.