And Finally

On 29 October, the English High Court sanctioned closure schemes of arrangement for The Orion Insurance Company PLC (now known as OIC Run-Off Limited) ("Orion") and The London and Overseas Insurance Company PLC (now known as the London and Overseas Insurance Company Limited) ("L&O").  These are expected to become effective early in 2016, subject to their recognition under Chapter 15 of the US Bankruptcy Code.

And Finally

The closure schemes should facilitate the once and for all determination and payment of the vast majority of creditors' claims in one of the longest running and arguably one of the most complex of the series of London Market insurer and reinsurer insolvencies that started in the 1990s.  These cases resulted to a large degree from the avalanche of claims resulting from natural disasters such as Hurricane Andrew and asbestos related diseases, death and injuries.

Orion and L&O first went into provisional liquidation in October 1994.  In March 1997, their creditors approved schemes of arrangement allowing for them to determine and make partial claims payments in the ordinary course.  Between 1997 and the present time, the percentage of claims paid to creditors has risen to 58%, with creditors having received US$622 million by way of dividend.  Assuming all goes to plan, the closure scheme will give creditors a final deadline to submit claims.  Those claims will then be valued and where necessary adjudicated in accordance with the scheme's determination and adjudication provisions.  This should in turn lead to the conclusion of the Orion and L&O insolvencies within the next three to five years.  This is far earlier than had previously been envisaged. 

The approval of this scheme of arrangement is a significant milestone both for the creditors of Orion and L&O and the London insurance market.  It is the climax of in excess of 10 years' work in an insolvency that has taken 21 years of painstaking effort to resolve.  The negotiation and drafting of the scheme has been complicated by the need to devise arrangements to facilitate the payment of claims of certain policyholders of the companies with policies signed and issued by the Institute of London Underwriters ("ILU").

The ILU acted as a trade association representing the interests of marine, aviation and transport underwriters from 1884 to 1998.  These policyholders are entitled to benefit from facilities that should continue to afford them payment in full of their claims.  The closure scheme also contains provisions giving certain stakeholders the ability to opt out of its provisions and seek partial payment of their claims as and when those claims arise, thereby combining the features of both an insolvent and a solvent scheme of arrangement.

Hogan Lovells has been at the forefront of insurance restructuring and insolvency cases for in excess of 20 years.  During that time, Hogan Lovells has undertaken roles in just about all the major insurance restructurings and insolvencies in the London Market including the scheme based restructuring of Equitable Life. 

London business restructuring and insolvency partner Joe Bannister has led the Hogan Lovells team representing Orion and L&O's provisional liquidators and scheme administrators – Dan Schwarzmann and Paul Evans of PwC, having worked on the matter since it started in October 1994. Joe has been supported throughout much of the closure process by senior associate Will Beck and insurance specialist partner, Nick Atkins.

Speaking on 29 October, Joe Bannister said:

"The approval of this scheme of arrangement is a major milestone in the resolution of this long, complex and international insurance bankruptcy.  The issues that it has raised have been challenging and in some cases without precedent.  We have been privileged and delighted to support the scheme administrators in their work over the past two decades".

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