LIBERTY INSURANCE DESIGNATED ACTIVITY COMPANY & LIBERTY SEGUROS COMPAÑÍA DE SEGUROS Y REASEGUROS, S.A.

Transcription

1 LIBERTY INSURANCE DESIGNATED ACTIVITY COMPANY & LIBERTY SEGUROS COMPAÑÍA DE SEGUROS Y REASEGUROS, S.A. INFORMATION BOOKLET RELATING TO: THE TRANSFER OF THE NON-LIFE INSURANCE BUSINESS OF LIBERTY INSURANCE DESIGNATED ACTIVITY COMPANY TO LIBERTY SEGUROS COMPAÑÍA DE SEGUROS Y REASEGUROS, S.A. Pursuant to Section 13 of the Assurance Companies Act 1909, Section 36 of the Insurance Act 1989 and Regulation 41 of the European Union (Insurance and Reinsurance) Regulations 2015 Liberty Insurance dac 1

2 CONTENTS SECTION 1 - Page 3 General Introduction and Background SECTION 2 - Page 4 Summary of The Terms of the Scheme* SECTION 3 - Page 6 Your Questions Answered SECTION 4 - Page 8 Summary of The Report of the Independent Actuary* APPENDIX - Page 15 Definitions WHERE CAPITALISED TERMS APPEAR IN THIS DOCUMENT (MARKED WITH AN ASTERISK*), PLEASE REFER TO THE DEFINITIONS SECTION IN THE APPENDIX WHICH EXPLAINS THEIR MEANING Liberty Insurance dac 2

3 SECTION 1 General Introduction and Background The Liberty Mutual Group is making applications in Ireland*, Spain and Portugal to consolidate the insurance activities of its operations in those countries into a single regulated entity in Spain. As part of this process, the insurance business of the Liberty Mutual Group's operations in Ireland* and Portugal will transfer to a Spanish affiliate, Liberty Seguros* which will continue to operate the Irish and Portuguese businesses. This process, which is subject to regulatory and Irish High Court approval, is expected to take effect from 31 December 2018 or as soon as possible thereafter. This change will not negatively impact our Irish business or our customers or customer policies in any way. We are committed to the Irish market, our 250,000 customers, our people and our broker partners who we work with across our motor, home and commercial product portfolio. We have made significant investment in the Irish market and will continue to invest in the Irish market for the foreseeable future. Upon completion of the consolidation process referred to above, we will continue to trade in Ireland* as an Irish branch of Liberty Seguros*, and will continue to be regulated in Ireland* for conduct of business rules by the Central Bank of Ireland. Liberty Insurance dac 3

4 SECTION 2 Summary of the Terms of the Scheme General The following is summary of the Scheme* for the Transfer* of the policies of Liberty Insurance Ireland* to Liberty Seguros. Nature/Scope of the Scheme* The Scheme* provides for the Transfer* of the policies of Liberty Insurance Ireland* to Liberty Seguros*, and other matters in relation to the Transfer* which will arise as a consequence of it. The Transfer* is to be effected pursuant to Section 13 of the 1909 Act*, Section 36 of the 1989 Act* and Article 41 of the 2015 Regulations*. The Transfer* On the Scheme Date*, the non-life insurance business of Liberty Insurance Ireland* will be transferred from Liberty Insurance Ireland* to Liberty Seguros* and become part of Liberty Seguros * business. Liberty Seguros* will become the insurer of the transferring policies in place of Liberty Insurance Ireland* with effect from the Scheme Date*. With effect from the Scheme Date*, Liberty Seguros* will assume responsibility for all of the liabilities in respect of the transferring policies and Liberty Insurance Ireland* will be released from all such liability. Rights of Policyholders Holders of transferring policies will retain the same rights with Liberty Seguros* under those policies as they previously had with Liberty Insurance Ireland*. Premiums currently payable to Liberty Insurance Ireland* will automatically become payable to Liberty Seguros*. Proceedings If on the Scheme Date* any judicial, quasi-judicial, disciplinary, administrative, arbitration or other proceedings shall be pending by or against Liberty Insurance Ireland* in respect of transferring policies, the same shall be continued by or against Liberty Seguros*. Administration It is intended that there will be no variation in the terms and conditions governing the transferring policies. Excluded Policies Liberty Insurance Ireland* is supervised and regulated by the Central Bank of Ireland. However, under Irish law and in accordance with the applicable EU directive, where Liberty Insurance Ireland* has issued a policy to an individual who now lives in any European Union or EEA* country outside Ireland*, that policy cannot be transferred by the Scheme* unless the relevant supervisory authority in that other country has been notified of the proposed Transfer*, and either agrees to the Transfer* or does not object within three months from the notification. If it becomes necessary to exclude any such policy from the Scheme* because of a lack of consent, or because for some reason it is not otherwise capable of being transferred on the Scheme Date*, Liberty Insurance Ireland s* liabilities under that policy will be fully reinsured by Liberty Seguros* until such time as the requisite consent is obtained (or, failing that, the relevant policy has expired) and Liberty Seguros* will be responsible for the administration of those policies. It is not envisaged that there will be any excluded policies but it is standard practice for the Scheme* to cater for the potential for excluded policies. Liberty Insurance dac 4

5 Modifications or Additions On or before the Scheme Date*, Liberty Insurance Ireland* and Liberty Seguros* may agree to any modifications or additions to the Scheme*, subject to the Court s* approval and advance notice of that change or addition to the Central Bank of Ireland. If after the Scheme Date* it proves impossible or impractical to implement the Scheme*, Liberty Seguros* may apply to the Court* for consent to amend the terms of the Scheme*. That application must be accompanied by a report from an Independent Actuary*, and the Central Bank of Ireland and Liberty Insurance Ireland* must be notified in advance and their consent obtained. Costs and Expenses The costs and expenses of, and incidental to, the Scheme* will not be borne by the policyholders of either Liberty Seguros* or Liberty Insurance Ireland*. Governing Law The Scheme* is governed by the laws of Ireland*. Liberty Insurance dac 5

6 SECTION 3 Your Questions Answered Whilst it is not possible to cover every aspect of the Scheme* in this Information Booklet*, we feel that these are some of the questions which you are most likely to have in connection with the proposed Transfer* of Liberty Insurance Ireland s* business to Liberty Seguros*. Q: Will my policy be the same after the Transfer*? A: Yes. We can confirm the Transfer* will not have any effect on your policy and there will be no changes made to your existing policy terms and conditions. Q: Am I required to take any actions? A: No action is required by you. This Information Booklet* is intended to provide you with further information and advise you of your rights. Q: Has any independent person reported on the Scheme*? A: Yes, an Independent Actuary* has considered, reviewed and reported on the Scheme*. A summary report is set out in Section 4 of this Information Booklet*. The Independent Actuary* has concluded that, in his opinion: The security of benefits to policyholders of Liberty Insurance Ireland* and Liberty Seguros* will not be materially adversely affected by the implementation of the Scheme* on 31 December 2018; The Scheme* will not have a material adverse effect on the reasonable benefit expectations of any of the policyholders involved; and The Scheme* will not have an adverse impact on the policy servicing levels currently experienced by the policyholders of Liberty Insurance Ireland* and Liberty Seguros*. The Independent Actuary* was jointly proposed by Liberty Insurance Ireland* and Liberty Seguros* and his appointment was notified to the Central Bank of Ireland. Q: What is an actuary? A: An actuary is a professionally qualified person who compiles and analyses statistics and uses them to calculate insurance risks and premiums. An actuary has an in depth knowledge of how insurance companies work and can use these skills to assess the impact of change on them and their policyholders. Q: Will this Transfer* automatically go ahead? A: The Court* will sanction the Scheme* only if satisfied that it has heard all persons whom it considers should be heard and is satisfied that no sufficient objection has been established. Q: Why is the sanction of the Court* necessary? A: Liberty Insurance Ireland* is an Irish insurance company, regulated by the Central Bank of Ireland. The laws of Ireland* apply to the Scheme*. Therefore, under Irish law, it is necessary to apply to the Court* for its sanction of the Scheme* before it can take effect. The Court* must be satisfied that the interests of the policyholders are protected and that they are not being adversely affected by the Transfer*. Q: Can I object to the Transfer*? A: If you wish to object to the Transfer* you are entitled to be heard by the Court*. You are entitled to attend the Court* on the day to object in person, or by your legal adviser. Otherwise, you can notify Liberty Insurance Ireland* of your objection. Liberty Insurance dac 6

7 Any person who wishes to be heard on the hearing in relation to Transfer* should send a notice of their intention to appear, in writing, to A&L Goodbody Solicitors at North Wall Quay, International Financial Services Centre, Dublin 1, Ireland, no later than 5.00 p.m. on Friday 28 September 2018 and should indicate whether such person or persons support or oppose the Transfer*. Any person wishing to make submissions at the hearings of the Transfer* on 9 October 2018 should file an affidavit setting out those submissions with the Court* and serve a copy of that affidavit on A&L Goodbody at the address mentioned above no later than 5.00pm on Friday 28 September Q: What happens if the Court* does not approve the Transfer*? A: If the Court* does not approve the Transfer* Liberty Insurance Ireland's* policies will not transfer to Liberty Seguros* and will remain under the control and management of Liberty Insurance Ireland*. Q: What is the cross-border merger and why is also being undertaken? A: As well as the Transfer* which will be effected by the Scheme*, Liberty Insurance Ireland* and Liberty Seguros* also propose to undertake a cross-border merger whereby, upon completion of the cross-border merger, all of Liberty Insurance Ireland's* non-insurance related assets, liabilities and contracts will be transferred to Liberty Seguros*, and Liberty Insurance Ireland* will be dissolved without going into liquidation. Whereas the Transfer* to be effected by the Scheme* will provide for the transfer of Liberty Insurance Ireland's* insurance policies and its related insurance assets and liabilities, the cross-border merger will provide for the transfer of all remaining non-insurance related assets, liabilities and contracts, and will result in the dissolution of Liberty Insurance Ireland* upon completion of the cross-border merger. A separate application is being made to the Court* by Liberty Insurance Ireland* in connection with the proposed cross-border merger pursuant to Regulation 13 of the European Communities (Cross-Border Mergers) Regulations 2008 (as amended). This application will also be heard by the Court* on Tuesday 9 October It is intended that the proposed cross-border merger and the Scheme* will both take effect simultaneously on 31 December Further information and documentation in relation to the proposed cross-border merger can be found at Q: I have some other questions. Who do I contact? A: If you have any additional queries or concerns, you may contact Liberty Insurance by telephone on (if calling from the Republic of Ireland) or (if calling from Great Britain or Northern Ireland) or by ing libertymergerqueries@libertyinsurance.ie. Liberty Insurance dac 7

8 SECTION 4 Summary of the Report of the Independent Actuary The following is a summary of a Report on the Scheme* by the Independent Actuary*, Mr. Noel Garvey of KPMG. The full Report is available on request from the offices of Liberty Insurance Ireland* and Liberty Seguros* and on the internet at Liberty Insurance dac 8

9 Summary Report of the Independent Actuary Liberty Insurance dac 27 June 2018 Liberty Insurance dac 9

10 1 Introduction This document provides a summary of the Independent Actuary s Report (the Report ) that I have prepared, having been appointed by Liberty Insurance dac ( LIDAC ) Liberty Seguros Compañía de Seguros y Reaseguros, S.A ( LSCSR ). The full Report is available on request from the offices of LIDAC and LSCSR and on the internet at The Central Bank of Ireland has been notified of my appointment as an Independent Actuary to report on the proposed Scheme. The Independent Actuary s Report assists the High Court of Ireland with properly assessing the impact of the proposed Scheme of Transfer on all affected policyholders. It describes the proposed transfer of business under the Scheme of Transfer and assesses its likely effects on policyholders of LIDAC and LSCSR, including effects on benefit security and benefit expectations. The terms covering the proposed transfer are set out in the Scheme document that will be presented to the Irish High Court. I refer to that document as the Scheme of Transfer. It is anticipated that the Scheme of Transfer will be presented to the Court under Section 13 of the 1909 Act in July 2018 with a proposed effective date of 31 December 2018 ( Effective Date ). I have been provided with access to sufficient information to assess the proposed Scheme of Transfer and have had sufficient access to the relevant members of staff at LIDAC and LSCSR and their advisors to understand the impact of the proposals on all policyholders of both companies. Neither the Independent Actuary's Report, nor any extract from it, may be published without my specific written consent having been given, save that copies of the Independent Actuary's Report may be made available for inspection by policyholders and shareholders of both LIDAC and LSCSR and copies may be provided to any person requesting the same in accordance with legal requirements or any order of the Irish High Court. In the event such consent is provided, the Independent Actuary's Report must be provided in its entirety. A summary of my Independent Actuary s Report is set out below. 2 Background to LIDAC and LSCSR My full Report contains a summary of the products offered by LIDAC and LSCSR, together with financial details of both companies and their recent solvency position. I have not reproduced these details in this summary as my full Report is available on request from LIDAC and LSCSR. Liberty Insurance dac 10 2

11 3 Background to the Scheme of Transfer Liberty Mutual Group Inc. ( Liberty Group ) intends to consolidate its Irish, Portuguese and Spanish operations under a single regulated entity, LSCSR in Spain. The Scheme of Transfer provides for the transfer of LIDAC s non-life insurance business, incorporating the insurance policies, together with the associated liabilities and assets as at the Effective Date to LSCSR, such that the policyholder liabilities are extinguished in LIDAC. In addition, and simultaneously with the above Scheme, LSCSR will absorb LIDAC via a Cross Border Merger ( CBM or the Merger ) and its Portuguese subsidiary Liberty Seguros, S.A. ( Liberty Portugal ), by virtue of another CBM. I have considered how the proposed Merger by Absorption of Liberty Portugal will impact the Scheme and in particular the security of benefits of the transferring LIDAC policyholders. Note that for clarity I have not considered how the proposed Merger by Absorption of Liberty Portugal will impact Liberty Portugal or LSCSR policyholders as this CBM does not form part of the Scheme presented to the Court. I have been provided with all relevant information in relation to Liberty Portugal and I include a significant amount of this detail in my full Report. LIDAC and Liberty Portugal will continue to operate in Ireland and Portugal respectively as branches of LSCSR. I note that under the Scheme of Transfer: 4 Findings The findings of my full Report are summarised below. LIDAC and LSCSR are both subsidiaries of Liberty Group the fourth largest Property and Casualty insurer in the U.S. based on 2016 direct written premium data as reported by the National Association of Insurance Commissioners. It also ranks 75th on the Fortune 100 list of largest corporations in the U.S. based on 2016 revenue. The overall financial strength of Liberty Group is not impacted by the Scheme and therefore group support available to LIDAC and LSCSR policyholders remains in place post Scheme. Both LIDAC and LSCSR will operate under similar Liberty Group mandated governance arrangements and so there will be no change in the standards of governance which will apply. There are no changes planned to policyholder terms and conditions. There are no changes planned to how services are currently delivered to policyholders by LIDAC and LSCSR. The regulatory regime of the receiving entity, LSCSR, is the same as that of the transferring business i.e. Solvency II. Therefore the transferring policyholders will continue to be benefit from the same regulatory requirements. Liberty Insurance dac 11 3

12 I have considered the relative capital strength of LIDAC and LSCSR both pre and post the Transfer. I note for LIDAC policyholders: The level of solvency cover is expected to remain strong albeit lower than they currently experience. The absolute amount of available capital is however greater post Scheme than is currently the case for LIDAC pre Scheme; The key drivers of reduced solvency coverage for LIDAC policyholders is the loss of 40m AOF and the merger of Liberty Portugal which is less well capitalised than either of LIDAC or LSCSR. This is particularly true for the base case solvency projections for the merged entity which assumes transitional measures no longer apply to Portuguese Technical Provisions (although I note that LSCSR may apply to DGS for AOF or transitional measures in respect of Liberty Portugal); If the Merger with Liberty Portugal were not to proceed the projected security of transferring LIDAC policyholders is improved. Given that I am satisfied that the Scheme (including the Mergers) does not materially impact the financial security of policyholders I am also satisfied were the Liberty Portugal CBM not to take place; The change in risk profile for transferring policyholders does not materially impact the security of benefits and I have been provided with stressed and scenario testing; and There is no change to policyholder protection afforded to policyholders in the event of insolvency or administration of LSCSR post Scheme. I note for LSCSR policyholders: The level of solvency cover is expected to remain strong and will actually be improved were the Scheme to be sanctioned; The drivers of the improved solvency coverage is increased diversification within the SCR calculation; If the Merger with Liberty Portugal were not to proceed the projected security of LSCSR policyholders is improved. Given that I am satisfied that the Scheme (including the Mergers) does not materially impact the financial security of policyholders I am also satisfied were the Liberty Portugal CBM not to take place; and The change in risk profile for transferring policyholders does not materially impact the security of benefits and I have been provided with stress testing solvency coverage for the key drivers of risk based capital. 5 Policyholder communication In terms of policyholder communication I note that the following is proposed: Placing advertisements for the Scheme in the Irish Times, the Irish Independent and in the Iris Oifigiúil, the Irish State Gazette; Liberty Insurance dac 12 4

13 Displaying information on a dedicated website hosted by LIDAC where key documents, including the Scheme, the Petition, an Information Booklet (which will contain a summary of the Scheme and a summary of the Independent Actuary s Report), the full Independent Actuary s Report, the Notice of the Court Application and the FAQ s may be downloaded (free of charge); Displaying key documents including the Scheme and the Petition at the registered offices of both LIDAC and LSCSR in accordance with Section 13 (3) (c) of the 1909 Act; Writing to each LIDAC named policyholder on every in-force policy in late July/during August 2018 to advise of the proposed transfer and setting out the information required by Section 3.11 of the Consumer Protection Code 2012; The CBI consulting with the supervisory authority of every Member State where transferring contracts were concluded, in accordance with Regulation 41(3)(b) of the 2015 Regulations and complying with any publicity requirements of such Member States; and It is not proposed to issue individual notifications to LSCSR policyholders (and LSCSR has made the company s intentions known to DGS in this respect). Given my findings above and with the agreement / non objection of the CBI, DGS and the Court I am comfortable with this communication approach. 6 Conclusions It is my opinion, provided the proposed Scheme operates as intended, and I have no grounds for believing that it will not do so: The security of benefits to policyholders of LIDAC and LSCSR will not be materially adversely affected by the implementation of the Scheme on the Effective Date; The Scheme will not have a material adverse effect on the reasonable benefit expectations of any of the policyholders involved; and The Scheme will not have an adverse impact on the policy servicing levels currently experienced by the policyholders of LIDAC and LSCSR. My opinion above is based on: My review of all the pertinent historic and current information provided by LIDAC and LSCSR; Discussions with the management of LIDAC and LSCSR on what will happen post transfer; and Policyholders will continue to be part Liberty Group a Fortune 100 company and 4 th largest P&C insurer in the U.S. based on 2016 direct written premium. Noel Garvey, FSAI Independent Actuary KPMG in Ireland 27 June 2018 Liberty Insurance dac 13 5 Date

14 This document is made by KPMG in Ireland, an Irish partnership and a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity, and is in all respects subject to the negotiation, agreement, and signing of a specific engagement letter or contract. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks of KPMG International Cooperative ( KPMG International ), a Swiss entity. International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks of KPMG International Cooperative ( KPMG International ), a Swiss entity. (Job Number here) Liberty Insurance dac 14

15 APPENDIX Definitions 1909 Act* means the Assurance Companies Act 1909; 1989 Act* means the Insurance Act 1989; Court* means the High Court of Ireland; 2015 Regulations* means the European Communities (Insurance and Reinsurance) Regulations 2015; Independent Actuary* means the actuary appointed for the purposes of the Scheme* under Section 13(3) of the 1909 Act*; Information Booklet* means this document; Ireland* means the Republic of Ireland; Liberty Insurance Ireland* means Liberty Insurance Designated Activity Company, a designated activity company incorporated in the Republic of Ireland under company registration number ; Liberty Seguros* means Liberty Seguros Compañía de Seguros y Reaseguros, S.A., a composite life and non-life insurance company, incorporated in Spain on 18 March 1964 as a public limited company (sociedad anónima) with Spanish tax identification number A ; Scheme* means the Scheme agreed between Liberty Insurance Ireland* and Liberty Seguros* for the purposes of transferring all policies pursuant to the 1909 Act*, the 1989 Act* and the 2015 Regulations*, in its original form or with or subject to any modification, addition or condition which may be approved or imposed by the Court*; Scheme Date* means 31 December 2018 or such other date as Liberty Insurance Ireland* and Liberty Seguros* may agree and to which the Court* consents, upon which the order takes effect; and Transfer* means the transfer of all policies from Liberty Insurance Ireland* to Liberty Seguros*. Liberty Insurance dac 15