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News
Court rules in Equitas’ favour on LMX test cases The decision follows a three week long case in which a new precedent was set when Equitas was allowed the use of actuarial models to calculate substantial payouts. High court judge Mr Justice Gross said: ‘I am persuaded that the models are both capable of making the transition from the general to the particular and do go on to provide a reasonable representation of reality.’ Following the decision, Howard Kaye, group general counsel for Resolute Management Services (managers of the Equitas run-off), told Run Off & Restructuring: 'We felt strongly that there was no good reason why a well prepared actuarial model should not meet the burden of proof requirements in the making of reinsurance recoveries and the court has now confirmed that it does.' A statement released by R&Q said that its board was ‘disappointed to note that notwithstanding the very strong legal opinion given to it ahead of the trial, the court has determined that Equitas can use actuarial models.’ The dispute, which involved some 26 test cases representing more than 4,000 claims, largely related to losses following both the 1989 Exxon Valdez oil spill and claims by Kuwait Airways arising out of the first Gulf War. Payouts are likely to run into the hundreds of millions of pounds, however the ruling does include significant discounts of 25 per cent in the case of Exxon Valdez and 13.5 per cent in the case of Kuwait to be applied to the ultimate costs. The decision has been much anticipated, and Mr Justice Gross commented that he hoped the notorious LMX reinsurance spiral would be ‘kick-started’ by the ruling. Said Kaye: 'The case was fought to enable the LMX spiral, which had effectively come to a halt in 1996 for Kuwait losses and 1998 for Exxon losses, to recommence turning. In this respect we believe the case has particularly wide market implications since the frozen spiral had prevented other losses being recovered, not just Kuwait and Exxon. R&Q has stated it will be working with its financial advisors to ‘quantify the potential financial effect of this judgment on the group, which may well include reimbursement of the legal costs incurred by Equitas in the trial’, adding that it was considering ‘the possibility of a counter-claim to apply a discount to substantial sums previously paid to Equitas and is considering whether the judgment gives appropriate grounds for an appeal in whole or in part.’ In its 2009 interim report, R&Q had previously called the result of the case ‘potentially significant’ and noted that the legal costs of the dispute in that half year alone amounted to ‘approximately £2 million’. |
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News stories 2010 News |HERE|
Capita makes two key appointments |
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