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Member, Beacon International Group, Ltd.
A solvent scheme of arrangement is a mechanism that a U.K.-incorporated company, or any company with sufficient connection to the United Kingdom, can use.
The schemes allow debts, including incurred liabilities under insurance policies, to be transferred to another company.
Votes representing at least 75% of the value of creditors, including policyholders, must be secured at a meeting of creditors for a solvent scheme of arrangement to be allowed to proceed.
A court must determine whether such an arrangement is fair to creditors, including policyholders.
Solvent schemes of arrangement have been used by insurance companies for the past 15 years. They are regulated by the Companies Act 2006.
The U.K. insurance regulator is expected to comment soon on responses it received during a public comment period on a mechanism used by solvent insurance companies to dispose of books of business.