Catholic Church Insurance (CCI) is working to secure approval for its proposed scheme of arrangements to address claims uncertainty, warning there could be “higher risks regarding regulatory intervention” if the plan fails to pass. 

The troubled insurer has written to policyholders about the scheme, setting out how claims will be managed as the financially troubled insurer seeks to proceed with an “orderly” run-off. 

Initial briefings are taking place this week, followed in mid-August by a couple of weeks of roadshows around the country, in-person briefings, and virtual meetings to explain the scheme of arrangement. 

Policyholders will then vote on the scheme of arrangement and CCI aims to have the scheme in place by the end of October, subject to certain timelines to be agreed with advisers and the court process itself. 

“It is not clear what scenarios may occur if the vote is not successful, however in the absence of an approval of the scheme there are clearly higher risks regarding regulatory intervention that would create a much less preferrable outcome for policyholders,” CCI Chair Joan Fitzpatrick told insuranceNEWS.com.au. 

CCI needs to secure support from at least 50% of shareholders for the scheme to pass. 

Schemes of arrangements are binding, court-approved agreements that allow the reorganisation of the rights and liabilities of members and creditors of a company. Such arrangements are used by insurance companies to accelerate the run-off of their business, or parts of their business, while they are still solvent. 

The insurer proposed the scheme of arrangement after announcing in May it will cease issuing new or renewal policies and will voluntarily place the organisation into “run off” after it was unable to secure sufficient additional capital. The business will continue to manage claims from existing policyholders using its capital reserves. 

The requirement for a further capital injection arose from the continued significant number of new claims arising from historic abuse matters. 

Ms Fitzpatrick says the measure is a “precaution to ensure a fair, equitable and managed regime” would be implemented quickly to avoid insolvency in the event that insolvency became a possible outcome.

She says CCI “at this this point does have assets to meet their liabilities as they fall due” and that the “prudent reason for setting up this scheme is because of the long-term uncertainty regarding claims”. 

CCI is working closely with a representative group of policyholders called a Creditors’ Committee to ensure that the scheme that is proposed has the support of policyholders.