3rd Party Insurance Recovery

The client.

A major conglomerate with legacy liabilities.

The business issue.

This client faced an extremely large liability for asbestos claims associated with a legacy manufacturing company – it had sold the company's operational assets but retained the liabilities.

The client had insurance policies with large portion of London coverage – in particular Equitas coverage (the run-off entity formed in 1992 to deal with pre-1992 Lloyd's Name Syndicate liabilities). Equitas, as a run-off entity, is under solvency pressures. In order to reduce its solvency risk, the client sought finality, making it willing to consider buy-outs at an acceptable price.

The solution.

Claro Group professionals, together with legal counsel, pursued the following approach:

• Projected potential future defense and indemnity costs
• Developed and analyzed hypothetical scenarios reflecting differing solvency assumptions.
• Presented cost projections and coverage analysis to the client's management team to achieve settlement authority for given deal terms.
• Presented and defended the client's demand to Equitas and reached an acceptable buyout value and terms.

The results.

This approach enabled the client to:

• Achieve a buyout value consistent or above its expectations, relative to the likely recovery values under highly likely outcomes.
• Achieve this result with minimal legal and transaction costs.