An unnamed Lloyd’s syndicate has assumed liability for 177,00 policies that were written by the now-defunct Danish insurer Alpha.
On its webpage, the UK’s Financial Services Compensation Scheme said the policies that had been transferred provided guaranteed asset protection - or gap - cover.
The insurer collapsed earlier this year under the weight of French construction losses, that it wrote for New Zealand-based CBL, which was put into interim liquidation by its home regulator in February.
Now, FSCS has said that its broker Premia Solutions had secured the replacement coverage on its behalf.
“Affected policy holders will receive a letter from Premia Solutions outlining the details of the transfer of their policies,” the compensation scheme said on its website.
The replacement cover kicked in on Saturday, the day after Alpha cancelled its policies.
The FSCS said Alpha provided a range of insurance policies to the UK retail and commercial market.
“Policy types included solicitors’ professional indemnity insurance, motor insurance gap insurance and latent defects insurance,” it said.
Alpha was declared bankrupt in May following the collapse of CBL.
According to CBL’s 2016 annual report, Alpha held a 3.1 percent stake in the company which will almost certainly be worthless following the appointment of liquidators in New Zealand and the suspension of trading in its shares, which are listed on the Australian and NZ stock exchanges.
Alpha – which distributes through a chain of MGAs in Europe – accounted for around 11.4 percent of CBL’s NZ434.8mn ($313.4mn) in gross written premiums.
According to Toby Fiennes, the head of prudential supervision at the NZ financial regulator, Reserve Bank of New Zealand, CBL provided quota share reinsurance to Alpha from 2006 for French construction business, dommages-ouvrage (DO) - or “insurance of the works”.
CBL collapsed after the scale of its liabilities from writing the business line, primarily from the now defunct Gibraltar MGA Elite, became apparent.
For French DO, Alpha would retain 50 percent and cede 50 percent to CBL. Until late 2016, CBL would reinsure 80 percent of Elite’s book of DO.
At the end of February, the Danish regulator ordered Alpha to increase reserves on Norwegian workers compensation business by DKK227mn ($37.5mn) and on French construction business by DKK62mn.
Alpha is one of three large unrated Danish insurers/MGAs - together with Qudos and Gefion - that partners with European MGAs and retail distributors to write niche specialty and commercial SME products.
Alpha’s ownership is spread widely, with many of its business partners owning small, minority stakes. But it is understood that investment fund manager Twelve Capital has a EUR20m ($24.6mn) investment in the firm.