Adverse development cover will protect Equity up to £119m
Equity Red Star has a $A200m (£119m) reinsurance deal to protect it from further bodily injury claims, it has emerged. The reinsurance was taken out by Equity’s parent, Insurance Australia Group (IAG).
In a separate development, Lloyd’s, which has the power to limit Equity’s capacity, is monitoring the business closely.
The adverse development cover (ADC) will protect Equity up to £119m further deterioration. The company said this meant that it was “amply protected”.
IAG revealed the reinsurance protection subsidiary after it emerged last month that the FSA was investigating Equity’s reporting of bodily injury claims.
In the six months to 30 June, Equity suffered a £262m deterioration in its estimate of claims for the 2008 and 2009 years of account.
IAG said Equity was taking action to halt the slide. Equity, which operates through Lloyd’s syndicates, is no longer offering private car and van insurance on the four biggest price comparison sites.
It is also beefing up its underwriting and acturial teams, as well as putting rates up 20% across most classes of business.
Lloyd’s was “actively working with IAG and Equity Redstar, and monitoring the situation closely”, a spokesman said. Lloyd’s could limit Equity’s capacity in future auctions, in which investors sign up to providing capital.
IAG confirmed that syndicate underwriterJohn Josiah will retire next year to be replaced by former Zurich underwriting chief Mark Bacon.
IAG UK chief executive Neil Utley is to be replaced by New Zealand chief executive Ian Foy.