R&Q Insurance stymied in restructuring, Bermuda regulators crack down
Bermuda regulators have put a pause to the restructuring of R&Q Insurance Holdings while they investigate the viability of the rump group that would remain after a planned disposal of its program business subsidiary.
The Bermuda Monetary Authority (BMA) has demanded an independent actuarial review of the would-be capital position, reserve requirements and projected cash flows of a rump R&A group following the planned sale of unit Accredited to Onex.
On those concerns, the BMA has now demanded that redemption be suspended on $20 million in Tier 2 debt that was to have matured today, December 22. Interest on the notes will continue to accrue.
The BMA further warned it would not consider approval of any additional disposals from the rump legacy business until its review is concluded. This includes transfer of the UK motor loss portfolio as announced late October.
Shares of R&Q are trading down 18.2% on the London Stock Exchange on the news.
“The board remains firmly committed to the legacy plan outlined,” management said of its larger group restructuring plan, while admitting the BMA decisions “will impact R&Q Legacy's ability to complete certain transactions in the short term.”
“The Board reiterates its belief that a successful Sale represents the best outcome for all stakeholders, including enabling R&Q to undertake a material financial de-leveraging to support the strategy of transitioning the Legacy business to a capital efficient and stable recurring fee-based business model,” management said.
R&Q determined back in April it would separate its legacy insurance business, R&Q Legacy, and its program management business Accredited.
R&Q later announced a pending sale of Accredited to Onex in a deal valuing the unit at $465 million, from which R&Q would take net cash proceeds of some $300 million, the bulk of which it could put to debt reduction right away.
The later loss portfolio transfer reinsurance agreement was to have covered net reserves of around $80 million.
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