Reinsurance Deals Inked to Help Troubled Tower Group

Tower Group International, Ltd. said Tuesday that it is ceding more than 20 percent of its commercial liability business and 30 percent of its workers comp business to three reinsurers under pro-rata deals designed to enhance Tower’s financial flexibility.

The reinsurers extending lifelines to the troubled insurer are Arch Reinsurance Ltd., Hannover Re and Southport Re.

In addition to the quota-share deals, Southport is also providing two retrospective aggregate excess-of-loss covers.

Tower’s August announcement that it would delay its 10-Q filing for the second quarter and strengthen its loss reserves prompted shareholder investigations and the subsequent filing of a class action lawsuit.

Last month, the insurance group said it planned to release its delayed second-quarter 2013 financials during the week of Oct. 7, and it reaffirmed the timing in Tuesday’s announcement about the reinsurance deals.

The company provided the following descriptions of the reinsurance agreements:

• In the deal with Arch Reinsurance, Tower Insurance Company of New York (Tower New York), on its behalf and on behalf of each of its pool participants, entered into a multi-line quota share agreement to cede a 17.5 percent quota share of certain brokerage commercial automobile liability, brokerage commercial multi-peril property, brokerage commercial multi-peril liability and brokerage other liability (monoline liability) business.

The agreement covers losses occurring on or after July 1, 2013 for policies in-force as at June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013.

• In the deal with Hannover Re (Ireland) Plc, Tower New York will similarly cede a 14 percent quota share of certain brokerage commercial automobile liability, brokerage commercial multi-peril property, brokerage commercial multi-peril liability, brokerage other liability (monoline liability), as well as brokerage workers compensation business.

This agreement likewise covers losses occurring on or after July 1, 2013 for policies in-force as at June 30, 2013 and policies written or renewed from July 1, 2013 to December 31, 2013.

• Three deals with Southport Re (Cayman), Ltd.involve only workers comp and employers liability business.

• The first agreement with Southport, a quota-share agreement in which Tower New York cedes 30 percent of its workers’ compensation and employer’s liability business, will cover losses occurring on or after July 1, 2013 for policies in force as at June 30, 2013 and policies written or renewed during the term of the agreement.
• The second agreement is an aggregate excess-of-loss agreement, with Southport Re assuming a portion of the losses incurred by Tower New York on its workers’ compensation and employer’s liability business between January 1, 2011 and May 31, 2013, but paid by Tower New York on or after June 1, 2013.
• The third deal covers Tower Reinsurance, Ltd. (Tower Re), a wholly-owned Bermuda-domiciled reinsurance subsidiary of Tower, under the same terms—with Southport Re assuming a portion of the losses incurred by Tower Re on its assumed workers’ compensation and employer’s liability business between January 1, 2011 and May 31, 2013, but paid by Tower Re on or after June 1, 2013.

Source: Tower Group International, Ltd.