A surge in asbestosis claims has pushed Chester Street Insurance Holdings into insolvency, leaving thousands of industrial-disease claimants uncertain if they will get compensation.
Pricewaterhousecoopers partners Dan Schwarzmann and Colin Bird were appointed provisional liquidators of Chester Street on January 10 after a review of the company's financial position by its board of directors.
They found its assets of £30m were dwarfed by its liabilities of £250m.
Schwarzmann said he could not yet say how many claimants were involved, as actuaries Watson Wyatts were still carrying out an investigation.
But he revealed that more than 2,000 companies had employers' liability policies with Chester Street.
It is believed to be the first big UK insurer to collapse because of the rise in industrial-disease claims.
“We know now that creditors will not receive payment in full,” Schwarzmann said.
On December 19 last year Chester Street's directors issued a scheme of arrangement, which contained provisions for the part-payment of claims.
Schwarzmann said these part-payments could be topped up by the Policyholders' Protection Board (PPB).
“I believe that the scheme continues to be in the best interest of scheme creditors as a whole,” he said. “I strongly recommend that scheme creditors vote in favour of it.”
Creditors will review the scheme and vote whether to accept it on February 5.
A PPB spokesman confirmed that, as employers' liability is a compulsory insurance, claimants of all business types should be eligible for full payment of their claims.
He said the liquidators would set a percentage of each claim that could be paid from the net assets of Chester Street, which would be added to by the board to equal 90% or 100% of the claim.
The financial problems relate to policies sold before 1990.
Chester Street was formerly part of the Iron Trades Employers' Association.
From 1990, all business was underwritten by its subsidiary Iron Trades Insurance Company, which was bought by QBE International Insurance last February.
The ongoing business of Iron Trades is in no way connected with Chester Street.