Overview

Reversing the run-off projection for Trenwick America Reinsurance Corporation (“Trenwick”)

Trenwick provided reinsurance to insurers and reinsurers of property and casualty risks and was placed into runoff and non-judicial supervision by the Connecticut Insurance Department. The Princeton Partnership team was the third management team engaged to handle the runoff, taking control in 2008. Over the next 8 years, through aggressive strategies, our team’s efforts shortened the runoff period and led to mitigated future lost costs. As a result, Trenwick was released from non-judicial supervision by the Connecticut Insurance Department with no external capital.

^$ 205 M

Decreased gross reserves from approximately $236M+ to $31M+

607 %

Between December 31, 2007 and December 31, 2015 risk based capital increased from 139% to 746%

^$ 75 M

gross gain, driven by an overall average discount against carried reserves of 52%

THE CHALLENGE

Trenwick was expected to be placed in formal judicial liquidation and be put out of business

In 2003, Trenwick was placed into runoff and ceased issuing reinsurance contracts. That same year Trenwick was placed in non-judicial supervision by the Connecticut Insurance Department. With approximately 75% of Trenwick’s liabilities resolved prior to 2008, it was believed that there was no remaining residual value in Trenwick’s remaining business, and ultimately its remaining assets would be insufficient to pay all of its remaining liabilities.

AREAS OF EXPERTISE

Run-off Strategies
Operational Performance

The Fix

A revitalized, aggressive program creates value for Trenwick

The Princeton Partnership assumed responsibility for the strategic direction and management of Trenwick at the beginning of 2008. The general expectation was that our team would continue to wind down Trenwick’s operations and liabilities. Instead, management began instilling aggressive strategies across the organization. The runoff period was shortened and future lost cost was mitigated. Through this process, The Princeton Partnership team created value for Trenwick and began reshaping their future outlook.

A program of aggressive review and enforcement of reinsurance contract terms

With the goal of limiting liabilities to those which were clearly contemplated by the written contracts in force and the obligations actually undertaken, management engaged in a rigorous system of review and enforcement.

An aggressive program of commutation

All strategies were directed towards the strategic goals of increasing the commutation discount and limiting adverse development. Future liabilities under reinsurance contracts were bought out at a negotiated present value.

Issues concerning the propriety of the business “ceded” under the contracts became a lynchpin for value creation

It became evident that the liabilities Trenwick was being asked to pay didn’t reconcile with the liabilities as reflected by the reinsurance contracts to which Trenwick was a party.

The Results

Under management of The Princeton Partnership from 2008-2016, Trenwick was able to effectuate an overall savings of greater than 50% with respect to the liabilities reflected on its books. Tens of millions of dollars were saved through the implementation of a successful litigation strategy. As a result, Trenwick was released from non-judicial supervision by the Connecticut Insurance Department with no external capital infusion.