Creditors of the insolvent London-based KWELM insurance companies will receive an average additional 11% payout across the five companies, according to the eleventh annual report for 2004 issued today. The average payment will be 64%.
The report also projects that the average distribution will rise further to between 68% and 74% in the next 12 months. This is higher than projected in the early closure scheme which came into effect in April 2004.
Highlights: • Average distribution to creditors rises from 53% to 64%, payable from end May 2005; distribution levels to date range from 53% to 72% across the five companies.
• Creditors received a further $444m in 2004 taking total benefits to $3.4bn.
• Cumulative gross reinsurance recoveries reached $2.1bn including $78m recovered during 2004.
• Aggregate agreed and submitted liabilities were $3.8bn at end March 2005.
• Income generated of $111m exceeded expenses by $82m.
The KWELM companies are subsidiaries of the failed London United Investments plc. They comprise Kingscroft Insurance, Walbrook Insurance, El Paso Insurance, Lime Street Insurance and Mutual Reinsurance. They specialised in US casualty, professional indemnity and other liability insurance business. Over 90% of the KWELM assets and liabilities are in US dollars and most of the policyholders are based in the United States.
The companies and their creditors entered into a Court approved “Scheme of Arrangement” in 1993, the objective of which is to pay out to valid creditors the maximum sum in the minimum timescale. The scheme was amended in 2004 to permit early closure.
The payouts for the five companies are:
Kingscroft – revised payment 65% (previous payment 57%)
Walbrook – revised payment 65% (previous payment 51%)
El Paso – revised payment 72% (previous payment 62%)
Lime Street – revised payment 68% (previous payment 60%)
Mutual – revised payment 53% (previous payment 44%)
Average – revised payment 64% (previous payment 53%)
Chris Hughes and Ian Bond, the Scheme Administrators responsible for the run off of the businesses, comment:
“We have made significant progress processing the additional claims submitted by the September 2004 bar date. The revised payment percentages are based on our March 2005 estimate of $3.8bn of agreed and submitted liabilities. We expect this figure to fall further as we settle the remaining claims.
“This will enable us to pay a higher overall distribution than projected in the scheme documents, and within a shorter timescale. When we launched the original scheme in late 1993 we predicted an average return to creditors of 39% during a timescale extending beyond 2015.
“In the event, the average distribution in 2004 has risen to 64% and we are hoping to raise the payouts to between 68% and 74% before the end of 2005.”
The administrators also predict that creditors will receive a small ultimate distribution of one or two% within the next two to five years.
