BMA puts R&Q legacy transactions on hold

The Bermuda Monetary Authority has told R&Q Insurance Holdings to put on hold any external legacy insurance transactions until the regulator completes a review, the company announced today.

In a statement, Bermuda-based R&Q said it had been told to put on hold approval of any external legacy transactions to R&Q Re pending the review, including a loss portfolio transfer announced in October.

It has also been told to pause the redemption of $20 million worth of notes which were due to be redeemed today.

R&Q announced in October that it was selling its programme management subsidiary Accredited to private-equity investment company Onex Corp. for $465 million and that it expected to receive $300 million in net proceeds from the sale.

The deal, which required shareholder and regulatory approval and was expected to close in the first half of 2024, followed a “strategic initiative” R&Q announced in April to separate its runoff business from its ongoing insurance business, which supports programme managers in the US and Europe.

R&Q said that as part of the regulatory approval process, the BMA requested an independent actuarial review of the required reserves of the remaining Group post the sale, its capital and its cash flow projections.

It said: “The BMA has now notified R&Q that it will need to:

“• Pause the redemption of the Tier 2 US$20 million floating rate subordinated notes issued by R&Q Re (Bermuda) Limited which are treated as Tier 2 capital for solvency (the "Bermuda Subordinated Notes") due on 22 December 2023. Accordingly, the Bermuda Subordinated Notes remain outstanding on their terms and R&Q Re (Bermuda) will continue to pay interest on such notes as it accrues.

“• Put on hold the approval of any new external legacy transactions to R&Q Re (Bermuda) while the BMA undertakes its review of R&Q Legacy. This includes the UK Motor loss portfolio transfer announced 26 October 2023.”

R&Q said the BMA’s review and actions would “impact R&Q Legacy’s ability to complete certain transactions in the short term”, but added that the board remained firmly committed to the legacy plan outlined in a circular published on December 14.

“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,” the company said.

In the circular, R&Q scheduled a special general meeting to be held on January 11, 2024 at 71 Fenchurch Street in London for shareholders to vote on the sale.