Propgen Insurance Limited
Summary of transaction enabling the company to exit the insurance business
Propgen Insurance Limited (Propgen) has been a Maltese based insurance company, licensed and regulated by the Maltese Financial Services Authority (MFSA) since January 2006. Its license to carry on general business of insurance in and from Malta covers classes 1, 2, 8, 9, 16 and 17 and reinsurance in classes 8, 9, 16 and 17 (as described in the Third Schedule of the Insurance Business Act, Cap. 403 of the Laws of Malta, the “Act”) and has passported its activities by way of freedom of services into the United Kingdom.
Propgen is part of the Barbon Group of companies (Barbon) which is headquartered in the United Kingdom. Barbon’s principal activities support the buy-to-let market by providing references of tenants to letting agents and landlords, and it is an intermediary for providing insurance products to landlords, letting agencies and tenants.
Until December 31, 2018, Barbon placed almost all of the insurance business with Propgen and Ageas Insurance Limited (Ageas), which is an “A“ rated UK insurance and reinsurance company regulated by the UK’s Prudential Regulatory Authority. Ageas is licensed to cover classes 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18 of Part 1 of Schedule 1 of the UK’s Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Since January 1, 2019 Barbon placed all of its business with Ageas and no longer placed any new or renewal business with Propgen.
Barbon and Propgen had been considering the implications or the 2016 Brexit vote and were concerned at the ongoing level of uncertainty over how insurers based in European Union countries would be able to continue conducting business in the UK. Propgen had over 100,000 UK policyholders and was concerned that a disorderly Brexit could result in difficulties around settlement of claim. Barbon and Propgen wanted to ensure that policyholders’ rights would be fully protected and decided that the only way to guarantee certainty was to cease arranging any insurance through Propgen. Barbon already had a working relationship with Ageas and Ageas agreed that it would issue policies from January 1, 2019 covering the same risks that had previously been covered by Propgen and that all claims handling arrangements that Propgen had in place would be mirrored by Ageas. Upon renewal of the 2018 expiring policies, Barbon gave policyholders the choice of having new policies with Ageas or they could make their own arrangements to purchase insurance elsewhere in the marketplace. For policyholders that previously had coverage through Propgen and now have coverage through Ageas, the change of insurer was seamless.
Policies issued by Propgen covered:
- Landlord’s property
- Tenant’s property
- Emergency Assistance
- Rent Guarantee
The implications for Propgen
Propgen issued no new policies after December 31, 2018 but still needed to settle claims for policies that had been underwritten before that date. The very nature of insurance means that claims can continue to be administered and settled for several months, if not years, after a policy has expired. Historically, the bulk of Propgen’s claims have been settled within 27 months of the start of a policy year. This meant that for the 2018 policy year, most of the claims would be settled by March 31, 2020. Propgen estimated that by that date, there would be approximately 100 claims in the process of being settled.
The administrative costs of operating an insurance company with such a small volume of unsettled claims was judged to be so high that alternative arrangements needed to be investigated and pursued, provided that policyholder’s rights would be protected and that the arrangements would be approved by the MFSA. Barbon and Propgen held discussions with Ageas and agreed, subject to contract, that Ageas would take over all of Propgen’s claims obligations from June 30, 2020.
Why was Ageas selected to take over Propgen’s insurance obligations?
Barbon already had a working relationship with Ageas for all policies that it arranged since January 1, 2019. Ageas had mirrored Propgen’s claims processes for those policies and was satisfied that they worked well. Transferring old claims from Propgen to Ageas would not involve any change in claims handling processes or personnel and the claimants would experience a seamless transfer. The only noticeable change to a claimant would be that final settlement would be made by Ageas rather than Propgen.
What steps did Propgen need to take in order to effect the transfer to Ageas?
Propgen and Ageas agreed, subject to contract, in March 2020 to enter into a transfer agreement with effect from June 30, 2020. A formal transfer agreement has to be agreed between Propgen and Ageas and this will be submitted to the Propgen Board for approval at its scheduled meeting on June 17, 2020.
Propgen has written to all policyholders with claims in the course of settlement in order to explain the transfer arrangement. The claimants can make representations to Propgen or the MFSA if they were not satisfied that their rights are adequately protected and that they would be disadvantaged by the transfer. The MFSA’s address is: Insurance & Pensions Supervision Unit, Malta Financial Services Authority, Triq l-Imdina, Zone 1, Central Business District, Birkirkara, CBD 1010, Malta. Website: www.mfsa.mt
Advertisements were placed in two UK national newspapers on 15 May 2020 explaining the transfer.
Due to the Covid-19 situation the policyholders are not able to view this statement at the offices of Propgen and Ageas so as an alternative, a copy of this statement is made available on the website of Ageas. www.ageas.co.uk
The MFSA will need to approve the transfer agreement and be satisfied that the claimants are not disadvantaged. The MFSA has communicated with the PRA to enable the PRA to advise whether it had any reservations about the arrangement.
When will the transfer take place?
The agreement is subject to receiving approval from the MFSA and the PRA. Provided this is received, the effective date of the transfer will be June 30, 2020.