CBL to ditch French business
CBL Corporation is reviewing all “exit options” for its French construction insurance business and seeking legal recourse from the business’ vendors just over a year after sealing the €94.5 million ($149 million) purchase.
The specialty insurer’s decision to abandon Securities and Financial Solutions (SFS) Europe follows a strategic review showing it consumes a high level of capital for a long time and involves significant estimations of future claims by independent actuaries.
“Although profitable… the board considers the level of estimations and the potential for adjustment presents a disproportionate level of a risk for the wider business of the group,” the New Zealand insurer said last week.
“CBL is currently appointing advisers to run this process on its behalf… all exit options are being considered.”
One option involves a sale of the insurance book and the distribution and operational networks of the managing general agents, European Insurance Services and SFS, on a going-concern basis.
The exit process is expected to take up to 90 days. CBL will cease writing new French construction business from next month and renewals will end from June.
CBL has triggered its legal rights against the vendors of SFS under the purchase agreement and, alongside other potential remedies, has recourse to $NZ40 million ($37.2 million) to recover against its balance sheet.
In a separate statement, CBL says incoming COO Suzanne Tindal will not take up the position this month, as was announced last November. A mutual agreement to terminate the appointment is attributed to the “events taking place”.
The insurer will provide more details about a planned capital raising and information on the French exit when its full-year results are released on Tuesday next week.
CBL also faces regulatory concerns after the Reserve Bank of New Zealand reviewed information provided to assess adequacy of reserves for the French business. The regulator issued a number of directions, including setting the insurer’s minimum solvency at 170%.
The Central Bank of Ireland has also directed CBL Insurance Europe to strengthen its capital base, reserves and reinsurance security.
Trading of CBL shares in New Zealand and Australia has been suspended at the company’s request since February 2.