Last week the High Court at Auckland approved a plan proposed by ACS (New Zealand), known as a scheme of arrangement. ACS New Zealand is the largest insurer of churches and heritage buildings, and its creditors include Christchurch’s Catholic and Anglican cathedrals.
In February the company, formally known as Ansvar, changed its name to ACS (New Zealand) to avoid confusion with its immediate parent company Ansvar Insurance Ltd (Australia).
The plan comes into effect if a “trigger event” occurs – basically, if ACS becomes insolvent. It would allow ACS to have managers instead of liquidators take control if the company became insolvent.
In approving the application Justice Venning said the scheme provided the best opportunity for an “ordered and efficient” management of insurance claims.
“It is inevitable that if a liquidation was to occur, the liquidator would need some time to familiarise themselves with the operation of the company and would proceed on a cautious basis which would likely result in material delays when dealing with claims.”
At a meeting on 12 June in which ACS sought creditors’ approval of the plan, the financial administrator of the Catholic Diocese in Christchurch, Paddy Beban, asked, “Why the haste?”
There had been a lack of time to consider the material and as late as 8.30pm the night before the meeting additional data had been posted on the company’s website, he said.
Reports from KPMG and the Reserve Bank had been released only a few days before.
In its report The Reserve Bank report raised red flags over the fairness to policyholders of a scheme that took longer to settle their claims.
It also raised concerns about the solvency of ACS, highlighted by an independent report by KPMG which indicated a 25 per cent risk of ACS not being able to settle the hundreds of millions of dollars of earthquake claims.
At the meeting Policyholders voted in favour of a contingency scheme put forward by ACS.
On June 30, ACS will be subject to legislated solvency requirements – the Solvency Standard for Non-life Insurance Business in Run-off – which requires a higher solvency buffer than the Companies Act test.
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