Catholic Church Insurance (CCI) policyholders will vote tomorrow on an arrangement to pay out a percentage of claims if the financial position of the organisation deteriorates and it risks becoming insolvent. 

CCI went into run-off at the end of May following high volumes of historic abuse cases, which it refers to as professional services claims, noting that it had sufficient funds to meet liabilities from previously written business when they fall due. 

The scheme of arrangements would be triggered and provide for a percentage of claims to be initially paid, rather than the full amount, if that’s no longer the case. 

“Whilst we are operating in run-off, CCI continues to experience financial vulnerability especially as professional standards claims persist,” Chairman Joan Fitzpatrick says in a letter to policyholders, described as creditors in the scheme booklet. 

“The board’s purpose in developing the scheme is to ensure that regardless of the financial position of CCI, CCI’s current and future claimants, in respect of Insurance Contracts are treated fairly and that claims are settled as quickly and as fully as possible.” 

If the scheme isn’t approved and at a future date CCI became insolvent, it could be placed in liquidation, meaning that recoveries available under reinsurance policies would likely be significantly reduced and other issues would affect funds available for policyholders. 

The scheme wouldn’t apply to workers’ compensation policies, which are covered by various state and territory legislation. 

CCI management’s unaudited financial results for the year to June 30 show a loss of $274.8 million, according to a table in the scheme booklet. At the end of July, it had a net assets of $16.4 million. 

The company’s gross central estimate of outstanding claim liabilities has consistently increased year on year, resulting in an estimate of about $988 million in 2023, which is a material increase from about $488 million in 2018, the booklet says. 

The company has been actively considering potential corporate transactions which could include “by way of example only, the sale of certain lines of business or the ‘renewal rights’ associated with a line of business”, it says.  But no binding agreements have been reached. 

If policyholders vote in favour of the scheme of arrangement tomorrow, it is expected it would go to the Federal Court on Thursday for approval. 

CCI made the decision to enter run-off after it was unable to raise sufficient additional capital. CCI is owned by Australasian Catholic entities and has 78 shareholders.