The parent firm of the collapsed Orion Insurance Co. agreed to pay in full claims relating to marine and aviation policies written by Orion.
The International Nederlanden Verzekeringen (Natned), Orion's parent, agreed to honor policies the Institute of London Underwriters (ILU) issued since the 1970s on behalf of Orion.Orion, and its insurance subsidiary London & Overseas, ceased underwriting in 1992, and were declared insolvent in October 1994. Officials said they could not estimate the total amount of claims to be paid.
As members of the ILU - the London market representing company insurers of marine and aviation risk - Orion and L&O wrote a significant portfolio of marine and aviation insurance and reinsurance business. Since the appointment of provisional liquidators in October 1994, claims under these policies have been agreed to, but not paid.
The new agreement, signed between the ILU and Natned, covers liabilities arising from L&O policies issued by the ILU and starting on or after March 20, 1969, and Orion policies issued by the ILU and starting on or after Aug. 28, 1970. Claims must have been agreed to by the insurer or be the subject of court judgments or arbitration awards.
Claims from direct insureds and reinsureds who are themselves reinsurers will not be covered under the agreement. But the ILU expects to sign a further agreement dealing with reinsureds.
Claims will be paid monthly with the first payments starting in July. The ILU warned there may be some initial delay due to the backlog of unpaid claims since the company went into liquidation.
The agreement reinforces the extra security available to policyholders when insuring through the ILU. The institute commonly obtains guarantees from the parent companies of members in case of payment default. Under U.K. law, parent companies are not responsible for the liabilities of their subsidiaries where that firm is a limited company, as was the case with Orion.
Meanwhile, claims relating to non-ILU policies written by Orion and L&O are unlikely to be paid. In these instances, creditors may receive a proportion of their claims as part of funds distributed under normal liquidation procedures.
A spokesman from the ILU commented, "Holders of Orion policies written through the ILU will be 100 percent reimbursed. They will be much better off than the companies' other claimants."