Application of Gordian RunOff Limited under the Insurance Act 1973 (Cth) (No 2)

Gordian RunOff Limited (GRO) applied to the Federal Court of Australia for confirmation of three schemes under the Insurance Act 1973 (Cth) to transfer parts of the inwards reinsurance and inwards retrocession business of IAG Re Australia Limited, CGU Insurance Limited, and CGU-VACC Insurance Limited to GRO. The transferors are authorised by the Australian Prudential Regulation Authority (APRA) to carry on insurance business, while GRO is authorised to conduct run-off insurance business. The schemes aim to transfer specific business without altering the terms of the policies or the obligations of the parties involved.

The legal issues before the court included whether the schemes should be confirmed without modification, and if so, whether all outwards reinsurance responding to any contract transferred should also be transferred to GRO. The court had to consider the interests of policyholders and the solvency of the companies involved, as well as the procedural steps taken to notify policyholders about the schemes.

Justice Yates found that the schemes would not adversely affect the policyholders of the transferors or GRO, based on the actuarial report provided by Mr. Warrick Evan Gard. The solvency coverage ratios of the transferors would slightly improve, while GRO's solvency coverage, though reduced, would remain significantly above the minimum capital requirement. The court also noted that there were no objections from APRA or policyholders to the schemes. The court confirmed the schemes without modification and ordered the transfer of all outwards reinsurance responding to the Transferring Policies to GRO.

The final orders confirm the three schemes for the transfer of inwards reinsurance and inwards retrocession business, transfer all outwards reinsurance to GRO, and direct GRO to pay APRA's costs as agreed or, if not agreed, as taxed.