NRG London Reinsurance Company Ltd, in the matter of NRG Victory Aust Ltd and the Corporations Act 2001 - [2006] FCA 872

FEDERAL COURT OF AUSTRALIA
NRG London Reinsurance Company Ltd, in the matter of
NRG Victory Aust Ltd and the Corporations Act 2001 [2006] FCA 872

CORPORATIONS – Scheme of arrangement – two insurance companies, whose business was exclusively reinsurance, that had been in “run-off” for many years – “cut-off” scheme designed to quantify and pay out all existing claims – convening of meeting of creditors – whether separate meetings of “classes” of creditors should be convened – meaning of “class” in s 411(1) of Corporations Act 2001 (Cth) – considerations relevant to the question whether creditors should be regarded as belonging to different classes for purpose of s 411(1). Held: on the facts, separate meetings of classes of creditors not called for, a single meeting of all creditors being appropriate.
Corporations Act 2001 (Cth) s 411
Re Mercantile Mutual Insurance (Australia) Ltd (2002) 196 ALR 362 cited
Re Safety Fix Pty Ltd [1962] VR 467 cited
Re British Aviation Insurance Co Ltd [2005] EWHC 1621 distinguished
Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 cited
Re Hills Motorway Ltd (2002) 43 ACSR 101 cited
Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485 cited
Re Hawk Insurance Co Ltd [2001] 2 BCLC 480 cited
Re NRG Victory Reinsurance Ltd [2006] EWHC 679 cited
Re Sovereign Marine & General Insurance Co Ltd [2006] EWHC 1335 cited
NRG LONDON REINSURANCE COMPANY LIMITED (ABN 77 001 160 792)
NRG LONDON REINSURANCE COMPANY LIMITED (ABN 47 002 971 477)
NSD 1125 OF 2005
LINDGREN J
5 JULY 2006
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1125 OF 2005

IN THE MATTER OF NRG LONDON REINSURANCE COMPANY LIMITED AND NRG VICTORY AUSTRALIA LIMITED AND THE CORPORATIONS ACT 2001

NRG LONDON REINSURANCE COMPANY LIMITED
(ABN 77 001 160 792)

NRG LONDON REINSURANCE COMPANY LIMITED
(ABN 47 002 971 477)
Plaintiffs

JUDGE:

LINDGREN J

DATE OF ORDER:

5 JULY 2006

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.Pursuant to s 411(1) of the Corporations Act2001 (Cth), that NRG London Reinsurance Company Limited (“NRG London”) convene a meeting (the “NRG London Scheme Meeting”) of the scheme creditors (as defined) of NRG London in respect of their scheme liabilities (as defined) (the “NRG London Scheme Creditors”) for the purpose of considering, and if thought fit, agreeing to a scheme of arrangement proposed to be made between NRG London and the NRG London Scheme Creditors (with or without modification).
2.Pursuant to s 411(1) of the Corporations Act2001 (Cth), that NRG Victory Australia Limited (“NRG Victory”) convene a meeting (the “NRG Victory Scheme Meeting”) of the scheme creditors (as defined) of NRG Victory in respect of their scheme liabilities (as defined) (the “NRG Victory Scheme Creditors”) for the purpose of considering, and if thought fit, agreeing to a scheme of arrangement proposed to be made between NRG Victory and the NRG Victory Scheme Creditors (with or without modification).
3.The NRG London Scheme Meeting and the NRG Victory Scheme Meeting, together the “Scheme Meetings”, be advertised once in The Australian Financial Review, The Australian, The National Business Review in New Zealand, The New Straits Times in Singapore, the Papua New Guinea Post-Courier and other national newspapers distributed in the Pacific Islands, by an advertisement in the form or to the effect of Annexure “A” hereto, such advertisement to be published before 12 July 2006.

4.The Scheme Meetings be held at the offices of Clayton Utz Lawyers, Level 34, No. 1 O’Connell Street, Sydney, NSW, Australia on 15 August 2006. The NRG London Scheme Meeting commence at approximately 10.00am (Sydney Time) and the NRG Victory Scheme Meeting commence at approximately 10.30am (Sydney Time).
5.Ms Nancy Milne or, failing her, Mr Ian Hutchinson, be the Chairperson of the Scheme Meetings, (save that Mr Mark Moyes shall deal with any questions which may arise as referred to in part 7 of the Scheme Booklet).

6. The Scheme Meetings can resolve to be adjourned.
7.At the Scheme Meetings, the scheme creditors, present and entitled to vote thereat, in person or by proxy or by attorney under power, shall constitute a quorum.
8.Regulations 5.6.12 to 5.6.36A of the Corporations Regulations will apply to the Scheme Meetings, except that Corporations Regulations 5.6.12(4), 5.6.12(5), 5.6.12(6), 5.6.12(7), 5.6.13A, 5.6.13B, 5.6.14A, 5.6.14B, 5.6.15, 5.6.16, 5.6.17, 5.6.21, 5.6.22, 5.6.23, 5.6.24, 5.6.26, 5.6.27, 5.6.28, 5.6.29, 5.6.32, 5.6.33, 5.6.34, 5.6.36A, will not apply.
9.On or before 12 July 2006, the Scheme Companies send to:
(a)all companies who, according to NRG London's or NRG Victory’s records, have or may have a claim (as defined) under a reinsurance contract written by, or on behalf of NRG London or NRG Victory (including beneficiaries of the Australian Nuclear Insurance Pool listed behind Tab 16 of Exhibit “RL1” which were beneficiaries of the Pool in any year that either scheme company was on risk under the Pool);
(b)the manager of the Australian Nuclear Insurance Pool (ANIP Pty Limited) (multiple copies, for ANIP Pty Limited to distribute as it sees fit);
(c)all licensed Australian general insurers; and
(d)all brokers identified as having been involved in placing and/or administering business, other than in respect of excluded liabilities (as defined) with NRG London or NRG Victory,

by airmail, post or courier to each of their relevant addresses as known to the Scheme Companies, the Scheme Booklet which is Annexure “B” hereto [Annexure B comprises 114 pages and is not attached to this copy, but is available electronically], and which is comprised of the following:
(i)important notice to scheme creditors;
(ii)advisers, key dates and expected timetable;
(iii)table of contents;
(iv)a letter from the Scheme Companies;
(v)information about establishing the Schemes;
(vi)summary of the operation of the Schemes once they have become effective;
(vii)corporate history of the Scheme Companies and the Scheme Business;
(viii)Estimation Methodology;
(ix)Schemes of Arrangement and Deed Polls;
(x)Notices of Scheme Meetings;
(xi)Proxy and Voting Form;
(xii)Claim Form;
(xiii)additional information; and
(xiv)definitions.

10.The notices of meeting be settled in the form, or substantially in the form, of the notices of meeting which are part 7 of Annexure “B”.
11.The proxy and voting form be settled in the form, or substantially in the form, of the forms which are part 8 of Annexure “B”.
12.The proxy and voting form may be lodged by facsimile on fax number (02) 9274 3033 to the attention of Ross Littlewood, provided that the faxed proxy and voting form and the documents referred to in the proxy and voting form or accompanying the proxy and voting form are received by NRG London or NRG Victory, Level 21, Tower Building, Australia Square, 264 George Street, Sydney for the attention of Ross Littlewood not later than 5pm (Sydney Time), 11 August 2006.
13.The following procedure for resolving any disputes as to the value of claims for the purpose of voting at the Scheme Meetings apply:
(i)the Chairperson of the Scheme Meetings will have a discretion to determine what she/he considers to be the value to be attributed to a scheme creditor's claim, for the purpose of voting at the Scheme Meetings based on the Chairperson's estimate of NRG London's or NRG Victory's net liability to the scheme creditor in respect of the claim after any deduction, set-off or cross-claim;
(ii)the Chairperson of the Scheme Meetings will also have the power to reject a claim for voting purposes, in whole or in part, if she/he considers that it does not represent a reasonable assessment of the sum due from NRG London or NRG Victory;
(iii)in the event of a dispute, the Chairperson's decision will be final and binding, subject to an overriding decision of the Court at the second court hearing and any other right of appeal in law and, where possible, she/he will notify her/his decision on valuation for voting purposes to the relevant scheme creditor before the Scheme Meetings and in any event, after the Scheme Meetings but before the second court hearing;
(iv)Mr Mark Moyes shall deal with any question which may arise as referred to in part 7 of the Scheme Booklet.

14.Pursuant to s 411(1) of the Corporations Act, the Explanatory Statement for the schemes, being those parts of the Scheme Booklet (Annexure “B”) described in sub-paragraphs (i) to (viii) and (xiii) to (xiv) (inclusive) of Order 9 above, be approved.
15.The Court orders, until further order, that Tabs 13 and 14 of the Exhibit marked “RL1” to the Affidavit of Ross Littlewood sworn on 30 June 2006 and that Tabs 1 and 2 of the Exhibit marked “SC1” to the Affidavit of Scott Collings sworn on 30 June 2006, be confidential and may not be disclosed to any person other than the plaintiffs, the Australian Prudential Regulation Authority or the Australian Securities and Investment Commission, without leave of the Court.
16.The proceeding be stood over to 16 August 2006 at 9.30am for the hearing of any application to approve the schemes.

17.      These orders be entered forthwith.
Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1125 OF 2005

IN THE MATTER OF NRG LONDON REINSURANCE COMPANY LIMITED AND NRG VICTORY AUSTRALIA LIMITED AND THE CORPORATIONS ACT 2001

NRG LONDON REINSURANCE COMPANY LIMITED
(ABN 77 001 160 792)

NRG LONDON REINSURANCE COMPANY LIMITED
(ABN 47 002 971 477)
  Plaintiffs

JUDGE:

LINDGREN J

DATE OF ORDER:

5 JULY 2006

WHERE MADE:

SYDNEY

REASONS FOR JUDGMENT
INTRODUCTION

The plaintiffs (“the Scheme Companies”) apply for orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (“the Corporations Act”) that meetings of their respective creditors be convened for the purpose of considering and, if thought fit, approving schemes of arrangement between them and those creditors. They also seek an order approving the form of the Explanatory Statement for the schemes, and providing for the manner in which the meetings are to be held.
The Scheme Companies are insurance companies. Their businesses are in the nature of reinsurance and are in run-off. In broad terms, the purpose of each scheme is to accelerate the payment of reinsurance claims that have been made, or might be in the future, so as to resolve their potential reinsurance now, and to enable their businesses to be terminated.
“CUT-OFF” OR “VALUATION” SCHEMES GENERALLY
Schemes such as the present ones are referred to as “cut-off” or “valuation” schemes. While there have been several in England in recent years, this appears to be only the second in Australia, the first being the subject of Conti J’s judgment in Re Mercantile Mutual Insurance (Australia) Ltd (“MMIA”) (2002) 196 ALR 362.
Three general features of the proposed schemes may be noted:
·    first, the liabilities of the Scheme Companies to be subject to the schemes are all reinsurance liabilities. Accordingly, the “Scheme Creditors” will all be insurance companies or similar entities, that can be expected to be commercially sophisticated and knowledgeable, particularly in relation to the reinsurance considerations involved in any assessment of the schemes;
·    secondly, the business of both companies has been in run-off for a long time; and
·    thirdly, in the case of each Scheme Company there is a clear surplus of assets over liabilities.
In my view, the Scheme Companies must establish:
a.first, that all reasonable steps have been or will be taken to identify the Scheme Creditors and to bring the proposed schemes to the attention of all of them, and that it seems likely that their efforts in these respects will prove successful;
b.secondly, that the Explanatory Statement for the proposed schemes provides an adequate description of their effect, and otherwise complies with s 412(1) of the Corporations Act;
c.thirdly, that the manner in which the proposed schemes will operate is not so clearly unfair and unreasonable that they should not be allowed to go forward for consideration;
d.fourthly, that it is appropriate that there be, as proposed, a single meeting of all the Scheme Creditors of each Scheme Company as distinct from meetings of classes of Scheme Creditors;
e.fifthly, that the way in which the value of Scheme Creditors’ claims will be determined for the purposes of voting at the meeting of the Scheme Creditors for each Scheme Company is fair and reasonable;
f.sixthly, that the proposed schemes comply with the requirements of other provisions of the Corporations Act, including the requirement of s 411(2) that 14 days’ notice of the hearing of the application be given to the Australian Securities and Investments Commission (“ASIC”) and that ASIC has had a reasonable opportunity to examine the proposed schemes and explanatory memorandum, and to make submissions to the Court in relation to them;
g.seventhly, that the Scheme Companies have provided or will provide full disclosure concerning the proposed schemes, not only to the Scheme Creditors, to ASIC and to the Court, but also to the Australian Prudential Regulation Authority (“APRA”), and that APRA has also had a reasonable opportunity to examine the documents and to make submissions to the Court concerning them.
THE SCHEME COMPANIES
NRG London Reinsurance Company Limited
NRG London Reinsurance Company Limited (“NRG London”) is incorporated in the United Kingdom. It is an indirect subsidiary of ING Groep NV, a Netherlands incorporated and listed company.
NRG London was an active reinsurer until 1991, when it ceased underwriting new risks, and was placed into run-off.
As at 31 December 2005, NRG London had total assets of GBP 164,821,000 and total liabilities of GBP 108,500,000 (giving an excess of assets over liabilities of GBP 56,321,000).
NRG London (Australian Branch)
NRG London is registered in Australia as a foreign corporation under Part 5B.2 of the Corporations Act and is licensed as a general insurer under the Insurance Act 1973 (Cth) (“the Insurance Act”). Registration of a foreign corporation under the Corporations Act does not create a new legal entity (s 601BM). However, because APRA regulates only the Australian operations of NRG London, it is necessary to distinguish between its Australian and non-Australian operations.
APRA is concerned with the protection of NRG London’s Australian policyholders. There is a general requirement under s 28 of the Insurance Act that insurers maintain “in Australia” (as to which see s 116A of that Act) assets at least equal to the value of their liabilities. Prudential Standards made under the Insurance Act require foreign insurers to maintain assets in Australia in excess of their liabilities in Australia, in an amount at least equal to their “Minimum Capital Requirement”: Prudential Standard GPS 110, para 25 and Prudential Standard GPS 120, para 18. NRG London must, therefore, maintain a balance sheet for its Australian operations. The accounts so prepared depict the financial condition of a notional entity referred to as a “branch”: see Prudential Standard GPS 110, para. 25.
The notional division between NRG London’s Australian operations and its other operations is reinforced by restrictions that APRA places on NRG London’s ability to deal with its Australian assets. NRG London may not reduce its Australian assets (save to the extent of current-year profits) without APRA approval: Prudential Standard GPS 110, paras. 6 and 25; Guidance Note GGN 110.1, paras 20-22.
In this way, APRA “quarantines” within Australia assets sufficient to meet NRG London’s Australian liabilities. APRA is therefore able to ignore NRG London’s non-Australian assets and liabilities. NRG London’s Australian assets must not be applied, without APRA approval, towards satisfying its other non-Australian liabilities. (It is possible that NRG London’s Australian policyholders may benefit from NRG London’s non-Australian operations, in the sense that, at least so far as Australian law is concerned, NRG London remains obliged, and, subject to any contrary requirement of foreign law, able to apply its non-Australian assets towards satisfying its Australian liabilities).
For the above reasons, it is convenient to refer to the “Australian branch” of NRG London (“NRG London (Australian Branch)”) as if it were a separate legal entity. For the purposes of these proceedings, for example, because the liabilities of NRG London that are to be subject to the scheme are only those “in Australia”, it is convenient to refer to them as liabilities of the NRG London (Australian Branch).
NRG London (Australian Branch) was established in September 1973, and was an active reinsurer in the Australian market between 1974 and 1991. In 1991, NRG London (Australian Branch) was placed into run-off. Accordingly, it has now been in run-off for approximately the last 15 years. If the NRG London scheme is eventually implemented, NRG London (Australian Branch) will no longer be carrying on business.
As at 31 December 2005 NRG London (Australian Branch) had total assets of AUD 21,321,000 and total liabilities of AUD 7,211,000. (an excess of assets over liabilities of AUD 14,110,000).
NRG Victory Australia Limited
NRG Victory Australia Limited (“NRG Victory”) is incorporated in Victoria. It is also an indirect subsidiary of ING Groep NV.
NRG Victory was an active reinsurer in the Australian market between 1956 and 1993, writing both life insurance and reinsurance, and non-life reinsurance.
In 1993, NRG Victory ceased underwriting new risks. Unsuccessful attempts were made to sell the company as a composite insurer, and NRG Victory’s life business was transferred to Life Reinsurance of Australia Limited pursuant to a scheme under the Life Insurance Act 1945 (Cth) (“the Life Insurance Act”). NRG Victory’s non-life reinsurance business remained and was placed into run-off.
Accordingly, NRG Victory’s business has been in run-off for the last 12 to 13 years. If the NRG Victory scheme is eventually implemented, NRG Victory will no longer be carrying on business.
As at 31 December 2005, NRG Victory had total assets of AUD 47,268,000 and total liabilities of AUD 12,905,000 (an excess of assets over liabilities of 34,363,000).
THE PROPOSED SCHEMES
With two exceptions, the two proposed schemes are identical. The first exception relates to the way in which the Scheme Creditors are defined. The second relates to the value of Scheme Creditors’ claims, above which the respective Scheme Companies have a discretion to terminate the scheme and to “revert to run-off”.
The Scheme Creditors
In each scheme, the Scheme Creditors are creditors of the particular Scheme Company in respect of a “Claim”. A person has a Claim against a Scheme Company if the Scheme Company has a liability to that person under a contract of reinsurance, unless the liability falls within the expression “Excluded Liabilities”.
Each scheme defines Excluded Liabilities differently. In the NRG London scheme, Excluded Liabilities are all liabilities of NRG London under contracts of reinsurance that were not written through NRG London (Australian Branch).
In the NRG Victory scheme, Excluded Liabilities are all liabilities under contracts of life reinsurance that were transferred to Life Reinsurance of Australasia Limited by way of the scheme under the Life Insurance Act in late 1993 (mentioned at [18] above). Strictly, it is unnecessary to exclude such liabilities, since NRG Victory is no longer liable on those contracts. They were expressly excluded “for abundant precaution”.
The Compromise or Arrangement

In the absence of the proposed schemes, the Scheme Companies’ liabilities to the Scheme Creditors would be discharged in response to the making and assessment of claims over a lengthy period of time. Under the proposed schemes, all potential entitlements to reinsurance indemnity that a Scheme Creditor has against a Scheme Company will be valued and paid out now.
The Process by which the Value of Claims will be Determined
The first step in the determination of the value of Scheme Creditors’ claims is the submission of a “Claim Form”.
Where it has sufficient information to do so, the Scheme Company will pre-complete a Claim Form stating its estimate of the value of the Scheme Creditor’s claim. If the Scheme Creditor agrees with the estimate, it need take no further action.
If the Scheme Company has not pre-completed a Claim Form, or if the Scheme Creditor disagrees with the Scheme Company’s estimate, the Scheme Creditor will itself complete the Claim Form and submit it to the Scheme Company along with any relevant supporting information.
In order to assist the Scheme Companies, the Scheme Adjudicator (see below), and the Scheme Creditors in valuing claims, an “Estimation Methodology” has been prepared by Scott Collings, of Finity Consulting Pty Limited. Mr Collings is a Fellow of the Institute of Actuaries of Australia. He is the actuary appointed by NRG London (Australian Branch) and NRG Victory pursuant to s 39 of the Insurance Act and approved by APRA pursuant to s 40 of that Act. The Estimation Methodology is not a binding statement of the manner in which claims will be valued. It is, however, a statement of what Mr Collings believes is an appropriate actuarial approach to the valuation of most of the claims expected to be made. The Estimation Methodology is set out in Section 5 of the Scheme Booklet to be distributed to Scheme Creditors.
If the Scheme Company agrees with the value assigned by the Scheme Creditor, that amount will become the value of the claim. If the Scheme Company does not agree, and discussions do not produce agreement, the question of the value of the claim will be submitted to a “Scheme Adjudicator”.
The Scheme Adjudicator will consider all relevant information, may consult with advisers, such as actuaries and lawyers, and will determine the value of the claim.
Once the value of a claim is agreed or is determined by the Scheme Adjudicator, the Scheme Company will deduct from that amount any amount owing by the Scheme Creditor to the Scheme Company, and pay the balance to the Scheme Creditor (in the unlikely event that there is a balance owing to the Scheme Company, the Scheme Creditor will have to pay that amount to the Scheme Company).
Reversion to Run-Off
If the total amount of all claims exceeds a certain amount, the Scheme Company will have the option of terminating the Scheme and reverting to run-off. The amount is the amount for which provision for insurance liabilities has been made in the Scheme Company’s accounts. For NRG London (Australian Branch), that amount is $7,032,000, and for NRG Victory, it is $11,788,000.
The provision for reversion to run-off gives reassurance that the Scheme Companies will not be rendered insolvent as a result of an unexpectedly high value of Claims.
The most significant potential detriment for a Scheme Creditor is the possibility that the value of a Scheme Creditor’s claim will prove to be less than the amount of the indemnity to which the Scheme Creditor would have been entitled if run-off had continued. No doubt Scheme Creditors will take into account this disadvantage, and, on the other hand, the extent of the advantage to them of having money in hand, in determining whether to support the scheme.
Identification and Notification of Potential Scheme Creditors
A review of the records of NRG London (Australian Branch) and NRG Victory has identified many potential Scheme Creditors. There remains, however, the possibility that some may not have been identified. It must be remembered that we are considering insurers that entered into contracts of reinsurance with a Scheme Company prior to 1991 in the case of NRG London (Australian Branch), and prior to 1993 in the case of NRG Victory.
The records of NRG London (Australian Branch) identify only policyholders who have been in contact with NRG London (Australian Branch) since 1 July 1989, in connection, for example, with the payment or receipt of money, the provision of advice regarding premiums, or the notification of a claim. The records of NRG Victory disclose only the identity of all policyholders who have been in contact with it since 1 January 1994.
Both Scheme Companies have, however, also made inquiries of managers or agents of various underwriting pools regarding the identity of any remaining claimants on the pools.
In summary, all potential Scheme Creditors of both Scheme Companies have been identified except for any who have not had any contact with NRG London (Australian Branch) since 1 July 1989 or with NRG Victory since 1 January 1994.
Most potential claimants on NRG London (Australian Branch) and on NRG Victory are Australian insurance companies. Other potential claimants are Australian entities that are not authorized insurers (such as government insurance offices and self-insurers), and some New Zealand, Papua New Guinean and Pacific Islands entities.
In order to ensure that those possible further Scheme Creditors learn of the respective schemes, NRG London and NRG Victory will send copies of the Scheme Booklet to all authorised insurers in Australia, and to all brokers who have, to their knowledge, written business for NRG London (Australian Branch) or NRG Victory, as the case may be.
NRG London and NRG Victory will also advertise the respective schemes in newspapers in Australia, New Zealand and Papua New Guinea. Those advertisements will provide contact details for potential Scheme Creditors to make inquiries and to obtain copies of the Scheme Booklet.
There is a further category of policyholders who may be Scheme Creditors of NRG Victory. Between 1970 and 1974, NRG Victory accepted general insurance risks in South East Asia. It appears from the records of NRG Victory that this business was transferred to another company in 1974. It is not, however, possible to be certain that it was.
No claims emanating from South East Asia have been made on NRG Victory, and no contact with NRG Victory has been made on behalf of any South East Asian policyholder since at least 1994.
Given the apparent transfer of the South East Asian business to another company, and the lack of any known claims history, it is perhaps unnecessary that any steps be taken to notify potential South East Asian Scheme Creditors of NRG Victory, but in fact the NRG Victory scheme will be advertised in a newspaper in Asia.
The Scheme Booklet
Because of the similarity between the two schemes, only one Scheme Booklet has been prepared for distribution to the Scheme Creditors under both schemes. This does not trouble me: the differences between the proposed schemes are so minor that a potential Scheme Creditor under one scheme will not be confused or misled by the presence in the Scheme Booklet of a discussion concerning the other scheme.
The Scheme Booklet provides a comprehensive statement of:
(a)the way in which the schemes will operate;
(b)the principal advantages and disadvantages of the schemes;
(c)the financial circumstances of the Scheme Companies;
(d)the steps required to be taken by potential Scheme Creditors in relation to the schemes, and the meetings at which the Schemes will be considered for approval; and
(e)the absence of any interest on the part of the directors of the Scheme Companies that may be affected by the schemes.
The Scheme Booklet has been provided to APRA and ASIC. Certain parts of the Scheme Booklet constitute the Explanatory Statement for the schemes: see Corporations Act ss 411(1), 412(1).
Estimation Methodology
The Estimation Methodology provides for a different approach to the valuation of claims, depending upon whether they are “property damage”, “specific incident” or “latent injury” claims, and upon whether the claims are “known” or “incurred but not reported” (“IBNR”).
For property damage claims and specific incident claims that are known, the value will be the Scheme Creditor’s estimate of the value of the particular claim, that is to say, the amount recorded by the Scheme Creditor as the expected settlement cost of the claim.
For IBNR property damage claims and IBNR specific incident claims, no methodology has been prescribed. This is because it is considered unlikely that there will be any IBNR claims, and it will be incumbent upon a Scheme Creditor to prove that it has or may have such a claim, and how it should best be valued.
For latent injury claims, the valuation methodology applicable to known and IBNR claims will be applied. That is because both types of latent injury claims share certain features which make their valuation a similar exercise. For example, even once the total damage suffered by an individual as a result of exposure to asbestos is known, there are likely to be questions of “sharing”, both as between defendants and as between insurers. That is to say, because a person may have been exposed to asbestos from different sources and over a lengthy period of time, a Scheme Company may have an exposure only in respect of certain years or certain sources. As a result, liability for any one claim will usually be apportioned between different entities. The same considerations apply to IBNR asbestos claims.
The approach adopted by the Estimation Methodology to the valuation of latent injury claims is to permit the Scheme Creditor a wide discretion as to the way in which it will substantiate its claim. The Estimation Methodology indicates that information should be supplied to establish such matters as the nature of the exposure, the number of policyholders likely to be affected, and the likely frequency of claims. The value of latent injury claims will be determined on the basis of the supporting information supplied by the Scheme Creditor.
In all cases, there will be no discount applied to the value of a claim as a result of the proposed early payment, provided the claim is projected to settle within five years of the “Valuation Date” (30 June 2006). For claims that are projected to settle after 30 June 2011, the value of the claim will be discounted by 5.5% per annum, but only for the period from 30 June 2011 to the date of projected settlement.
Classes of Creditors
Subsection 411(1) of the Corporations Act empowers the Court to order a meeting or meetings of creditors “or class of creditors” to be convened. There will be a separate meeting for each Scheme Company’s Scheme Creditors (cf Re Safety Fix Pty Ltd [1962] VR 467 at 470), but it is not proposed to convene separate meetings for classes of Scheme Creditors of the one Scheme Company.
Are there classes of Scheme Creditors for which separate meetings should be convened?
If the answer to this question is yes, the proposed scheme to be considered at the class meetings would remain unchanged: there would be no change in the definition of the Scheme Creditors and there would not be a different scheme for each class. The scheme would be binding on either class only if agreed to by the necessary majority of the meeting of that class: see Corporations Act s 411(4).
Unless the scheme were to be changed to stipulate that it could proceed as binding on only one class of Scheme Creditors, such as the IBNR Scheme Creditors (see below), the scheme would become binding only if agreed to by both classes at their separate meetings: in effect, each class would have a right of veto. This would be so, even if, for example, the total value of the claims of non-IBNR Scheme Creditors was quite small compared to the value of the total value of the claims of IBNR Scheme Creditors. (In passing, it should be noted that s 411(5), which provides for an aggregation of the votes cast at separate meetings has no application: that subsection applies to multiple meetings of “creditors” or of the same “class of creditors, not to the separate meetings that necessarily arise from the existence of classes of creditors.)
Counsel for the Scheme Companies have fairly raised for the Court’s consideration two possible bases for the ordering of separate meetings of classes of creditors:
· first, the distinction between IBNR and other Scheme Creditors;
· secondly, the distinction between Scheme Creditors that are, and those that are not, indebted to the Scheme Company, giving rise to a set off.
I turn to the first possible basis of classification. Non-IBNR claims are to be valued at the settlement cost placed on them by the Scheme Creditor. Therefore, if the circumstances giving rise to the Scheme Company’s reinsurance liability under a claim have occurred and been reported, the Scheme Creditor will receive the amount that it would have received in the ordinary course by way of indemnity. The Scheme Creditor will be in the same position as it would have been in if the Scheme Company had continued in run-off. IBNR Scheme Creditors, on the other hand, would be in a different position than that in which they would have been under a run-off, because their future (and contingent) claims will be valued and they will be paid out. As Lewison J observed in Re British Aviation Insurance Co Ltd [2005] EWHC 1621 (“BAIC”) (at [83]), “barring a miracle, the valuation will not be the same as the indemnity.”
The significance of the notion of a “class” of creditors in the present context has been considered in several cases. In Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 (“Sovereign Life”), Lord Esher MR said (at 579–580):
“The Act says that the persons to be summoned to the meeting (all of whom, be it said in passing, are creditors) are persons who can be divided into different classes – classes which the Act of Parliament recognises, though it does not define them. This, therefore, must be done: they must be divided into different classes. What is the reason for such a course? It is because the creditors composing the different classes have different interests; and, therefore, if we find a different state of facts existing among different creditors which may differently affect their minds and their judgment, they must be divided into different classes.”
In the same case, Bowen LJ said (at 583) that a “class”:
“must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.”
More recently, in Re Hills Motorway Ltd (2002) 43 ACSR 101 (“Hills Motorway”), Barrett J observed (at 104) that:
“The test is thus not one of identical treatment. It is one of community of interest. The court must ask itself whether the rights and entitlements of the different groups, viewed in the totality of the scheme’s context, are so dissimilar as to make it impossible for them to consult together with a view to their common interest. The focus is not on the fact of differentiation but on its effects. The extent and nature of the differentiation must be measured in terms of the effect on the ability to consult together in a common interest or, in other words, the ability to come together in a single meeting and to debate the question of what is good or bad for the constituency as a whole and where the common good lies. Only if the differentiation destroys that ability – the word used by Bowen LJ is ‘impossible’ – does class distinction come to prevail.”
See also Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485 at [63] ff.
In MMIA, Conti J referred (at [18], [19]) to “the class question” in the circumstances of a scheme generally similar to the present schemes. His Honour referred to Sovereign Life, Hills Motorway, and Re Hawk Insurance Co Ltd [2001] 2 BCLC 480 at 527, and, applying Bowen LJ’s “impossibility of consulting together” test, held that a single meeting of all creditors was appropriate.
In BAIC, Lewison J considered (at [83]) that on the facts of that case, policyholders with “known” or “accrued” claims constituted a separate class from policyholders with IBNR claims. His Lordship said (at [92]):
“In my judgment in the particular circumstances of a solvent scheme, where a solvent liquidation is not a realistic alternative, those with accrued claims and those with IBNR claims have interests which are sufficiently different as not to make it possible for them sensibly to consult together “in their common interest”. In truth, they do not have a common interest at all.”
The decision in BAIC has not, however, been treated as deciding that policyholders with accrued claims must always be treated as constituting a separate class from policyholders with IBNR claims. In Re NRG Victory Reinsurance Ltd [2006] EWHC 679 (‘NRG Victory’), in which the circumstances were very similar to those of the present case, Lindsay J took the view that there was only one class of creditors. His Lordship said (at [17]):
“Whether separate classes for [‘accrued’ and IBNR claims] are truly necessary will depend on a long list of variables such that what is right for one company and one scheme will not necessarily be right for another. Where insurance companies are concerned, much will depend on matters such as the types of business which they covered and in what proportions between those classes of business; whether the business conducted was direct insurance or reinsurance and in what proportions; in what parts of the world, even, that their claimants are to be found; their solvency margins; how recently and when they stopped writing such new business as they used to write; the various times, class by class of business, at which they stopped; how long, accordingly, they have been in run-off and what has been their commutation experience.”
Finally, in Re Sovereign Marine & General Insurance Co Ltd [2006] EWHC 1335 (“Sovereign Marine”), Warren J also emphasised that each case depends on its own facts (see, for instance, [114]), and ordered the convening of a single meeting of creditors to consider a “cut-off” scheme.
BAIC is distinguishable on its facts. In particular, the creditors in that case were not, as they are here, all insurance companies. Indeed, “about 92 percent of its asbestos liabilities [were] owed to direct insureds”: BAIC at [6].
In the present case, the following features suggest the appropriateness of convening a meeting of only one class of creditors:
(a)The businesses in question are exclusively in the nature of reinsurance: the Scheme Creditors, all being insurers, can be expected to be commercially sophisticated and knowledgeable and to be able to assess where their best interests lie (in Sovereign Marine, Lindsay J regarded this consideration as a relevant distinction from the facts of BAIC);
(b)The whole of the reinsurance businesses (being in fact the whole businesses) of NRG London (Australian Branch) and NRG Victory will be subject to the schemes (as opposed to merely a part of those businesses being subject to the schemes);
(c)The reinsurance businesses of the Scheme Companies have been in run-off for over twelve years (as opposed to a short period of run-off, with corresponding uncertainty about, or instability in, the portfolio’s experience).
(d)Both Scheme Companies have assets significantly in excess of their liabilities (so that all policyholders can be confident of receiving payment in full on their claims).
(e)It is not expected that there will be many (or any) IBNR claims for property damage or specific incidents. It is expected that there will be IBNR claims for latent injuries, but in that case Mr. Collings has given evidence that the approach to determining both known and IBNR claims is similar. That is to say, in each case the approach is to determine the value of the claim in accordance with generally accepted actuarial principles.
(f)There is no suggestion that the value of any of the Scheme Companies’ IBNR claims will be unable to be estimated.

In my opinion, so far as the evidence reveals, it will be possible for Scheme Creditors of both IBNR and non-IBNR descriptions to consult together with a view to their common interest. It is not conclusive that the non-IBNR Scheme Creditors, or some of them, may be expected to think it immaterial to them whether the Scheme proceeds or not.
For the above reasons, I do not think it appropriate to order separate meetings of IBNR and non-IBNR Scheme Creditors.
It should be emphasised that if the meetings reveal a relevant problem, it will remain open to the Court not to approve the scheme. Indeed, although the observations made by Lewison J in BAIC related to the convening stage, in fact in that case the meeting of creditors had already been held and the question of the appropriateness of the single meeting as against class meetings was being dealt with at the approval hearing, at which some creditors appeared to oppose the granting of the approval. Indeed, in NRG Victory, Lindsay J observed (at [15]):
“… until the creditors have in fact had the opportunity of meeting and consulting together, it will be exceptionally difficult to be sure whether it will prove impossible or not for them to consult together with a view to their common interest. It is a somewhat broad test and there could well be cases where the creditors, given the chance to meet, prove more flexible, cohesive or mutually accommodating than their respective lawyers ahead of the event would have expected and that creditors, even lumped together, find no unfairness and more that is in common between them than might have been thought to be divisive.”
As noted above, the other basis on which it might be suggested that meetings of classes of the Scheme Creditors are called for is that some Scheme Creditors will have a debt owing by them to the Scheme Companies set off against the value of their Claims. One (albeit unlikely) consequence of the application of a set-off is that the Scheme Creditor may be indebted to the Scheme Company.
The fact of the existence of a set-off does not, however, change the fundamental nature of the compromise between the Scheme Company and the Scheme Creditors. In all cases, the issue to be decided by the Scheme Creditors is whether they wish to have their claims “accelerated” and valued now, or to call on their reinsurance indemnity in the ordinary course of run-off. It is by no means “impossible” for Scheme Creditors to discuss and consider that issue in circumstances where some of them will have countervailing amounts set off against their claims.
For these reasons, I think that it is appropriate for only one meeting of the Scheme Creditors of each Scheme Company to be convened.
Determination of Value for Voting at Meetings
The process by which the value of Scheme Creditors’ claims will be determined for the purposes of voting at the scheme meetings is set out in the Scheme Booklet. Where a Scheme Company has sufficient information to make its own determination of the value of a Scheme Creditor’s claim, it will pre-complete that Scheme Creditor’s Claim Form, inserting an estimated value of the claim. The Scheme Creditor may accept that value, or it may reject it and specify a different value.
The value of claims for voting purposes will be determined by the Chairperson of the meeting of Scheme Creditors. That decision will be based on:
(a)Information provided by the Scheme Creditor;
(b)Information available to the Scheme Company from its records; and
(c)Advice from the Scheme Actuary.
The advice of the Scheme Actuary, who is the Scheme Companies’ authorised actuary, Mr Collings, will ensure that the Chairperson will have available to him or her the advice of a suitably qualified and independent expert. That advice will be based upon the principles set out in the Estimation Methodology, referred to earlier.
Finally, any remaining concern will, of course, be able to be raised by a Scheme Creditor at the confirmation hearing or, if it is applicable, pursuant to s 1321 of the Corporations Act.
Compliance with the Corporations Act
The proposed schemes do not contravene the Corporations Act. In particular, the proposed Explanatory Statement complies with s 112(1).
Disclosure to APRA and ASIC
Full details of the Schemes have been provided in a timely manner to both APRA and ASIC. In particular, the Scheme Booklet, incorporating the Explanatory Statement and the proposed schemes, has been provided to them.
Both APRA and ASIC were notified of the date of the hearing, and indicated that they did not intend to appear to oppose the making of the orders sought.
CONCLUSION
Orders as sought should be made.

I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.
Associate:
Dated: 10 July 2006

Counsel for the Plaintiffs: Mr J T Gleeson SC and Mr N J Owens

Solicitor for the Plaintiffs: Clayton Utz

Date of Hearing: 3, 4, 5 July 2006

Date of Judgment: 5 July 2006

ANNEXURE “A”
CORPORATIONS ACT 2001 OF AUSTRALIA
NOTICE OF MEETINGS
NRG LONDON REINSURANCE COMPANY LIMITED
(ABN 77 001 160 792)
and
NRG VICTORY AUSTRALIA LIMITED
(ABN 47 002 971 477)
Notice is hereby given that by order made on 5 July 2006, the Federal Court of Australia has directed that meetings of the scheme creditors (as defined in the schemes of arrangement referred to below) of NRG London Reinsurance Company Limited ("NRG London") and NRG Victory Australia Limited ("NRG Victory") be held on 15 August 2006, commencing at 10.00 am and 10:30 am (Sydney time), respectively.
The Scheme Creditors of NRG London are defined in the NRG London scheme of arrangement as creditors of NRG London in respect of liabilities (including potential and future liabilities) under reinsurance contracts written through the Australian branch of NRG London, but excluding liabilities under reinsurance contracts not written through the Australian branch of NRG London.
The Scheme Creditors of NRG Victory are defined in the NRG Victory scheme of arrangement as creditors of NRG Victory in respect of liabilities (including potential and future liabilities) under reinsurance contracts written through NRG Victory, but excluding liabilities under reinsurance contracts that were transferred to Life Reinsurance of Australasia (now Hannover Life Re of Australasia Ltd) in 1993.
The purpose of the meetings is to consider, and if thought fit, agree to schemes of arrangement (with or without modification) proposed between NRG London and its Scheme Creditors and between NRG Victory and its Scheme Creditors.
Scheme Creditors may vote in person at the meetings or may appoint another person as their proxy to attend and vote in their place.
Any Scheme Creditor may obtain a copy of the proposed scheme of arrangement, the Explanatory Statement and the proxy and voting form required to be furnished pursuant to the Corporations Act by requesting the same by email to [email protected], by fax to the attention of Ross Littlewood on (61) (02) 9274 3033, or post by issuing a postal service request to Ross Littlewood, NRG London Reinsurance Company Limited, Level 21, Tower Building, Australia Square, 264 George Street, Sydney, New South Wales, 2000.
Date: 10 July 2006
Ross Littlewood
Director of NRG Victory Australia Limited and Agent in Australia for NRG London Reinsurance Company Limited

ANNEXURE “B”

Scheme Booklet
IN RELATION TO SCHEMES OF ARRANGEMENT
pursuant to section 411 of the Corporations Act, 2001 of Australia (the "Schemes")
between each of
NRG LONDON REINSURANCE COMPANY LIMITED (ABN 77 001 160 792) (a company incorporated in England, with limited liability, registered as a foreign company under the Corporations Act, 2001 of Australia)
and
NRG VICTORY AUSTRALIA LIMITED (ABN 47 002 971 477)
(together being the "Scheme Companies")
and their respective
SCHEME CREDITORS
(as defined in the Schemes)
This document is important and requires your immediate attention. If you are in any doubt as to any aspect of this proposal or as to the action you should take, you should consult your insurance broker or other financial or professional adviser without delay.

A copy of this Scheme Booklet has been made available to all licensed Australian general insurers and to brokers known to have been involved in placing and/or administering reinsurance contracts relating to the business covered by the Scheme.
IMPORTANT NOTICE TO SCHEME CREDITORS
Purpose of document: this Scheme Booklet (comprising the explanatory statement, notices of meeting and terms of the schemes of arrangement) has been prepared in connection with the proposed schemes of arrangement pursuant to section 411 of the Corporations Act between each of NRG London Reinsurance Company Limited and NRG Victory Australia Limited, the Scheme Companies, and their respective Scheme Creditors.
Time statements are made: this Scheme Booklet is dated 5 July 2006. The statements, opinions and information contained in this Scheme Booklet are made, held or given respectively as at the date of this Scheme Booklet, unless another time is specified and such statements, opinions and information are made, held or given solely by or on behalf of the relevant Scheme Company unless expressly attributed to another party. Service of this Scheme Booklet shall not give rise to any implication that there has been no change in the facts set out in it since such date. Subject to any obligations under the Corporations Act or any other applicable laws and regulations, each Scheme Company has no obligation to, and will not, disseminate after the date of this Scheme Booklet, any updates or revisions to any such statements or any change in events, conditions or circumstances on which any of those statements are based.
No admissions: nothing contained in this Scheme Booklet constitutes an admission of any fact or liability on the part of either Scheme Company or any other person in respect of any asset to which they may be entitled or any claim against them. No estimate of the amount of any claim against a Scheme Company specified in the voting form, or otherwise provided for voting purposes, shall be taken into account in calculating payments under the Schemes. Any such estimate shall only be used for voting purposes at the meetings of Scheme Creditors to consider the Schemes.
Summary qualified by Schemes: the summary of the principal provisions of the Schemes and related matters contained in this Scheme Booklet is qualified in its entirety by reference to the Schemes themselves, the full text of which is set out in Section 6.
Further copies of this Scheme Booklet may be obtained upon request from the Scheme Companies:
c/o NRG Victory Australia Limited,
Level 21, Tower Building
Australia Square
264 George Street
Sydney, NSW, 2000
Australia
Tel:      + 61 (02) 9274 3000
Fax:     + 61 (02) 9274 3033
Email:    [email protected]
Attention:          Mr Ross Littlewood
No other representations: neither Scheme Company has authorised any person to make any representation, whether oral, written, express or implied, concerning the proposed Schemes, which are inconsistent with the statements contained within this Scheme Booklet. Consequently, if such representations are made, they should not be relied upon.
ASIC: a copy of this Scheme Booklet has been lodged with ASIC under section 412(6) of the Corporations Act. ASIC has been requested to provide a statement, that ASIC has no objection to the Schemes. If ASIC provides this statement, then it will be produced to the Court at the time of the Court hearing to approve the Schemes. Neither ASIC nor any of its officers take any responsibility for the contents of this Scheme Booklet.
APRA: a copy of this Scheme Booklet has been provided to APRA. Neither APRA, nor any of its officers, take any responsibility for the contents of this Scheme Booklet. APRA has no formal role in relation to schemes of arrangement pursuant to section 411 of the Corporations Act, but in its capacity of prudential regulator of general insurers has confirmed that it has no objection to the Schemes proceeding.
Court: an order by the Court under Section 411(1) and (1A) of the Corporations Act is not an endorsement of, or any other expression of opinion, on the Schemes.
No financial advice: no Scheme Creditor should construe the contents of this Scheme Booklet as legal, tax, financial or other professional advice. This Scheme Booklet does not take into account the specific investment objectives, financial situation and particular needs of Scheme Creditors. Scheme Creditors should read this Scheme Booklet carefully, and in its entirety, before making a decision as to how to vote on the resolutions to be considered at the Scheme Meetings. Each Scheme Creditor should consult its own financial and/or professional advisers as to the legal, tax, financial or other matters relevant to the action it should take in connection with the Scheme.
Forward-looking statements: this Scheme Booklet may contain forward-looking statements relating to future matters which are subject to known and unknown risks, uncertainties and other important factors that could cause the actual conduct, results, performance or achievements of either Scheme to be materially different from those expressed or implied by such statements. Neither the Scheme Companies, nor their associates or respective officers and advisers, give any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Scheme Booklet will actually occur. You are cautioned not to place undue reliance on these forward-looking statements.
Capitalised terms: when used in this Scheme Booklet, capitalised terms have the meanings set out in section 11.
ADVISERS

Scheme Companies

NRG London Reinsurance Company Limited
Level 21, Tower Building
Australia Square
264 George Street
Sydney   NSW   2000
Australia
Contact:     Ross Littlewood

Tel:          +(61) (02) 9274 3000

Fax:          +(61) (02) 9274 3033

Email:       [email protected]

NRG Victory Australia Limited
Level 21, Tower Building
Australia Square
264 George Street
Sydney   NSW   2000
Australia

Contact:     Ross Littlewood

Tel:          +(61) (02) 9274 3000

Fax:          +(61) (02) 9274 3033

Email:       [email protected]

Scheme Actuary

Scott Collings
Finity Consulting Pty Limited

Level 7, 155 George Street
The Rocks NSW 2000
Australia

Contacts: Scott Collings/Adam Payne
Tel:         +(61) (02) 8252 3300

Fax:         +(61) (02) 8252 3399

Email:       [email protected]
             [email protected]

Australian Legal Advisers

Clayton Utz
Levels 22-35
No 1 O'Connell Street
Sydney NSW 2000
Australia
Contacts: Michael Parshall/Nicholas Mavrakis/
               Peter Mann

Tel:         +(61) (02) 9353 4000
Fax:         +(61) (02) 82206700
Email:       [email protected]
               [email protected]
             [email protected]

Scheme Adjudicator

Postal address:
Mark Moyes

3 red Pty Ltd
PO Box 761
Woollahra NSW 1350

Australia

Registered office:
Mark Moyes
3 red Pty Ltd
173 Sutherland Street
Paddington NSW 2021

Contact:     Mark Moyes

Tel:          +(61) (0) 410 464 362

Fax:          +(61) (02) 9327 3601

Email:       [email protected]

KEY DATES AND EXPECTED TIMETABLE
Proxy and voting forms to be returned by   5 pm Sydney time on 11 August 2006
Scheme Meetings  15 August 2006 commencing at 10.00 am
Court hearings to sanction the Schemes  16 August 2006
Effective Date of the Schemes   16 August 2006
Valuation Date  30 June 2006
Claims Submission Date   11:59 pm Sydney time on a date 120 days after the Effective Date
Long Stop Date   11:59 pm Sydney time on a date 365 days after the Claims Submission Date
The above dates, other than the Valuation Date, and the date of the Scheme Meetings, are tentative only as the date of the Court hearings will only be confirmed if the Scheme is approved at the Scheme Meetings. Guidance Notes and instructions for completion of the proxy and voting form are set out on the forms themselves.

Table of contents
1.Letter from the Scheme Companies
2.Establishing the Schemes
2.1Introduction
2.2Application of Schemes
2.3Creditors not covered by the Schemes
2.4Persons notified of the Schemes
2.5Reasons for the Schemes
2.6The main advantages of each Scheme
2.7Possible disadvantages of the Schemes
2.8Attending the Scheme Meetings
2.9How to attend and vote at the Scheme Meetings
2.10Value of Claims for Voting Purposes
2.11Consequences of voting at Scheme Meetings

3.Summary of the operation of the Schemes once they have become effective
3.1Introduction
3.2Prohibited acts
3.3Consequences of prohibited acts
3.4Interest
3.5Currency conversion
3.6Distribution of Claim Forms
3.7Completing Claim Forms and set-off
3.8Incorporation of proxy and voting form material
3.9Claims Submission Date and failure to submit Claim Form
3.10Review of submitted Claim Form
3.11Determination of Agreed Claims (Pre Set-Off)
3.12Determination of Final Determined Claims
3.13Dispute Resolution Procedure
3.14Payment of Final Determined Claims
3.15Broker funding
3.16Extension of time limits
3.17Reversion to run-off
3.18The Scheme Adjudicator
3.19The Scheme Actuary
3.20Final implementation of the Schemes
3.21Review of acts, omissions or decisions in respect of the Schemes
3.22Assistance to be provided
3.23Termination of the Schemes
3.24Scheme Costs
3.25Governing Law and Jurisdiction

4.Corporate history of the Scheme Companies and the Scheme Business
4.1Corporate history of NRG London and the Australian branch of NRG London and its Scheme Business
4.2Corporate history of NRG Victory and its Scheme Business

5.Estimation Methodology
5.1Introduction
5.2Types of Claim
5.3Jurisdiction of exposure
5.4Property damage Claims
5.5Claims for specific incident
5.6Claims for latent injury

6.Schemes of Arrangement and Deed Polls
6.1NRG London Scheme
6.2NRG Victory Scheme
6.3Attachment to Scheme
6.4Deed Poll - in favour of NRG London and its Scheme Creditors
6.5Deed Poll - in favour of NRG Victory and its Scheme Creditors

7.Notices of Scheme Meetings
7.1NRG London
7.2NRG Victory

8.Proxy and voting form
8.1NRG London Reinsurance Company Limited Scheme of the Australian branch
8.2NRG Victory Australia Limited Scheme

9.Claim Form
9.1NRG London Reinsurance Company Limited Scheme of the Australian branch
9.2NRG Victory Australia Limited Scheme

10.Additional Information
10.1Documents available for inspection
10.2Impact on non-Scheme Creditors of Scheme Companies
10.3Authorisations under Insurance Act 1973
10.4APRA
10.5ASIC
10.6Directors and Directors' interests
10.7Scheme Adjudicator and Scheme Adjudicator's Interests
10.8Scheme Actuary and Scheme Actuary's Interest
10.9Chairperson and chairperson's interest
10.10Legal advisers' interest
10.11No other material information
10.12Date of Scheme Booklet
10.13Summary Table and Detailed Tables

11.Definitions

LETTER FROM THE SCHEME COMPANIES

NRG London Reinsurance Company Limited (ABN 77 001 160 792)
NRG Victory Australia Limited (ABN 47 002 971 477)
5 July 2006
Dear Scheme Creditor
Proposed Schemes of Arrangement
We are writing to you concerning separate solvent schemes of arrangement that NRG London Reinsurance Company Limited (NRG London) and NRG Victory Australia Limited (NRG Victory) propose to enter into with their respective Scheme Creditors pursuant to section 411 of the Corporations Act (the Schemes).

The primary objective of the Schemes is to conclude the run-off of all business of NRG Victory and all business of NRG London written through its Australian branch at an earlier stage than would otherwise be possible. The NRG London (Australian branch) Scheme will not relate to any business of NRG London that was not written through its Australian branch.
This objective will be achieved by establishing an accelerated Claims agreement process whereby all Claims by Scheme Creditors against each Scheme Company, including future and contingent Claims, will be valued, finally determined and paid in full earlier than would be possible through a normal run-off.
Purpose of this document
This Scheme Booklet will summarise, amongst other things:
(a)the advantages and possible disadvantages of the Schemes (Section 2 and in particular Section 2.6 and 2.7); and

(b) the main provisions of the Schemes (Section 3); and
(c)background information in relation to the Scheme Companies and the business proposed to be included in the Schemes (Section 4).

These summaries are a guide only and should not be relied upon instead of reading the terms of the Schemes set out in Section 6 and the notices of the Scheme Meetings which are due to be held on 15 August 2006 at the offices of Clayton Utz, Level 34, No 1 O'Connell Street, Sydney NSW 2000 commencing at 10:00 am in the case of NRG London, and 10:30 am in the case of NRG Victory set out in Section 7.
Steps to be taken by the Scheme Creditor
On or before the Scheme Meeting:
·read the Scheme Booklet in its entirety;
·complete and return the proxy and voting form so that it is received no later than 5:00 pm (Sydney time) on 11 August 2006. Proxy and voting forms may also be handed in at the registration desk at the relevant Scheme Meeting prior to the commencement of the Scheme Meetings (see Section 2.9); and
·attend the relevant Scheme Meeting(s). The Scheme Meetings will be held on 15 August 2006 at the offices of Clayton Utz, Level 34, No 1 O'Connell Street, Sydney NSW 2000, commencing at 10:00 am.

The Scheme Companies will notify Scheme Creditors once the Schemes become effective and will place advertisements in The Australian, The Australian Financial Review, The National Business Review (NZ), The New Straits Times, Papua New Guinea Post-Courier and other national newspapers distributed in the Pacific Islands calling for Scheme Creditors to complete and submit Claim Forms. Where the Scheme Company has sufficient information to do so, it will pre-complete each Claim Form sent to any Scheme Creditor known to it at the Effective Date with an estimate of the value of the Claims of the Scheme Creditor. It will not pre-complete an amount with respect to IBNR.
Once notified that the Schemes have become effective:
·if you agree with the pre-completed amounts on the Claim Form, you are not required to submit a Claim Form or provide any supporting information;
·if you do not agree with the pre-completed amounts, you are required to complete or correct and submit the Claim Form (with supporting information) by the Claims Submission Date being 11:59 pm, Sydney time, on the first business day falling 120 days after (and not including) the Effective Date.

Consequences if Schemes become effective
If a Scheme becomes effective between a Scheme Company and its Scheme Creditors, the Scheme Company will, from that date (the Effective Date):
(a)cease to adjust Claims as they arise in the ordinary course of conducting its Scheme Business; and
(b)seek to agree a "once-and-for-all" valuation of each Scheme Creditor's Claim (including previously unquantified and/or un-notified Claims).

In order to qualify for payments under the Scheme, Scheme Creditors must duly submit their Claim Form in accordance with the Scheme by the Claims Submission Date, that is, no later than 11:59 pm Sydney time on the first business day falling 120 days after (but not including) the Effective Date. Each Scheme Company will endeavour to agree the value of the Scheme Creditor's Claim with the Scheme Creditor. If the valuations of such Claims cannot be agreed, they will be determined by the Scheme Adjudicator in accordance with the provisions of the Scheme, with limited rights of review. Claims which are agreed or determined in this way will become Agreed Claims (Pre Set-Off).
Once a Claim becomes an Agreed Claim (Pre Set-Off), set-off and other relevant deductions as described in Section 2.9 will be applied. The amount of the Scheme Creditor's Claim after such deductions will become the Scheme Creditor's "Final Determined Claim".
Final Determined Claims will be paid in full at the values so agreed between the applicable Scheme Company and Scheme Creditor, or as otherwise determined in accordance with the applicable Scheme.
In short, each Scheme, will effect a mass commutation between the Scheme Company and its Scheme Creditors.
Separate Schemes
It should be noted that each Scheme is in law a separate scheme of arrangement and is independent of the other. As a result:
(a)neither Scheme Company will have any liability or responsibility for the other Scheme Company's liabilities or obligations under the other Scheme Company's Scheme; and
(b)it is possible for one Scheme to become effective, even if the other Scheme does not become effective.

Directors Recommendation
The directors of each Scheme Company consider that its Scheme will offer its Scheme Creditors the most effective and economical method for having their Claims against it determined and paid in the shortest practicable time.
All Scheme Creditors who are entitled to vote at the Creditors' Meetings are encouraged to vote in favour of the Scheme.
Yours sincerely
Ross Littlewood
(agent for and on behalf of NRG London Reinsurance Company Limited, Australian branch and director of NRG Victory Australia Limited)
ESTABLISHING THE SCHEMES

This Section summarises why the Schemes have been proposed, their advantages and disadvantages, and sets out the process for the Scheme Meetings.
Section 3 summarises the terms of the Schemes if they become effective.

INTRODUCTION

The primary objective of each Scheme is to terminate the run-off of Reinsurance Contracts written by each Scheme Company much earlier than would be the case if Claims were left to mature in the normal course. Each Scheme establishes a method by which the present and future Claims of the Scheme Creditors will be valued as at the Valuation Date, 30 June 2006, and paid in full at the values agreed or determined in accordance with the provisions of the Schemes, at the earliest possible opportunity.
A scheme of arrangement, such as that proposed here, is a compromise or arrangement between a company or a registered foreign company and its creditors (or any class of them), entered into pursuant to section 411 of the Corporations Act.
A scheme of arrangement becomes legally binding on a company or a registered foreign company and its affected creditors if:

a majority in number representing not less than 75% in value of the creditors, or any class of creditors, present and voting in person or by proxy, vote in favour of the scheme of arrangement at a meeting specially convened with the leave of the Court;

the Court subsequently sanctions the scheme of arrangement; and

an office copy of the order of the Court sanctioning the Scheme is lodged with ASIC.

APPLICATION OF SCHEMES

Each Scheme is proposed between a Scheme Company and its respective Scheme Creditors.

Scheme Creditor is defined in the Scheme itself but, in summary, will be restricted to those persons who have, or may in the future have a Claim against a Scheme Company in respect of a Liability under a Reinsurance Contract written by or on behalf of the Scheme Company other than an Excluded Liability. This will include liabilities under or arising out of:

all reinsurance contracts written by or on behalf of NRG Victory or NRG London written through its Australian branch;

in the case of the Australian branch of NRG London, its membership of ANIP; and

in the case of NRG Victory, its membership of ANIP.

Excluded Liabilities are defined in each Scheme and in summary are:

in the case of NRG London, reinsurance contracts and insurance contracts written by NRG London other than through its Australian branch; and

(b)in the case of NRG Victory, reinsurance contracts which were transferred to Life Reinsurance of Australasia in 1993 (now Hannover Life Re of Australasia Ltd) under the Life Insurance Act 1945 and upon transfer, effectively ceased to be a liability of NRG Victory.

The Scheme Business is described in greater detail in Section 4.
Each of the Scheme Companies is proposing a Scheme and each such Scheme is, in law, a separate Scheme. A Scheme Company does not have any liability or responsibility for the other Scheme Company's liabilities or obligations. Each such Scheme is capable of becoming effective whether or not the other Scheme becomes effective.
Scheme Creditors should note that once a Scheme becomes effective, it will bind the applicable Scheme Company in respect of which it has become effective and all its Scheme Creditors worldwide, irrespective of whether they were notified of the Scheme and/or the Scheme Meetings or not and/or whether they voted at the Scheme Meeting or not, and if they voted, whether they voted for or against the relevant Scheme.

CREDITORS NOT COVERED BY THE SCHEMES

Each Scheme will:

not affect any creditor of a Scheme Company other than a Scheme Creditor; and

only affect Scheme Creditors in respect of their Claims, net of any deduction or set-off.

Creditors who are not Scheme Creditors will not be entitled to attend or vote at the Scheme Meetings.
As the Scheme Companies are solvent, the Scheme Companies intend to continue to pay these creditors in the normal course.

PERSONS NOTIFIED OF THE SCHEMES

A copy of this Scheme Booklet has been made available to:
·all parties who, according to a Scheme Company's records, have or may have a Claim under an insurance or reinsurance contract written by, or on behalf of the Scheme Company;
·the manager of ANIP, ANIP Pty Ltd, for distribution to such persons as it sees fit;
·all licensed Australian general insurers; and
·all brokers identified as having been involved in placing and/or administering business with a Scheme Company other than in respect of Excluded Liabilities.

The Scheme Companies would be grateful if those brokers provided with a copy of the Scheme Booklet would inform their clients of the Schemes to ensure that, wherever possible, each and every Scheme Creditor is notified of the Schemes and the action that it is required to take.
The fact that this Scheme Booklet has been made available to you does not necessarily mean that you are a Scheme Creditor or that you will be affected by either Scheme.
You may also wish to ask your broker for further details about your possible involvement with the Scheme Companies.

REASONS FOR THE SCHEMES

Each Scheme Company expects the run-off of its Scheme Business to continue for a considerable number of years and, as a result, believes that its Scheme will be the most effective method of making full payment to its Scheme Creditors in the shortest practicable time. Each Scheme will have the effect of concluding the run-off of the applicable Scheme Business earlier than would be the case if it were to continue until all Claims materialise and are agreed and paid in the normal course.
Each Scheme Company considers that all of its Final Determined Claims will be paid in full, based on its present financial condition assuming all Claims were to run to their natural expiry and taking into account the anticipated costs of running-off the Scheme Business. There is, however, no absolute guarantee that each Scheme Company will have sufficient financial resources to settle all of its Final Determined Claims in full.
As at 31 December 2005, NRG London's net asset position was as set out in the table below:

NRG London
£'000 (1)

NRG London (Australian branch)
A$'000 (2)

Total Assets

164,821

21,321

Total Liabilities

108,534

7,211

Net Assets

56,287

14,110

NRG London £'000 (1)	NRG London (Australian branch) A$'000 (2)
Total Assets	164,821	21,321
Total Liabilities	108,534	7,211
Net Assets	56,287	14,110

Notes:
(1)    Figures as per the audited accounts of NRG London for the year ended 31 December
        2005.
(2)    Figures as per the statutory return provided by NRG London (Australian branch) to
        APRA for the year ended 31 December 2005.
A more detailed summary of the audited balance sheet of NRG London as at 31 December 2005, is included in Section 4.1. Note that the figures for NRG London are presented in Pounds Sterling and the figures for NRG London (Australian branch) in Australian Dollars. The Reserve Bank of Australia website indicates that the official Pound Sterling/Australian Dollar exchange rate as at:
·30 December 2005 was 0.4246;
·30 June 2006 was 0.4049.

As at 31 December 2005, the audited balance sheet of NRG Victory indicated:

NRG Victory
$'000 (1)

Total Assets

47,268

Total Liabilities

12,905

Net Assets

34,363

NRG Victory $'000 (1)
Total Assets	47,268
Total Liabilities	12,905
Net Assets	34,363

Notes:
(1) Figures as per the audited accounts of NRG Victory for the year ended 31 December
2005.
A more detailed summary of the audited balance sheet of NRG Victory as at 31 December 2005 is included in Section 4.2.

THE MAIN ADVANTAGES OF EACH SCHEME

Each Scheme Company considers that its Scheme will be advantageous to its Scheme Creditors for the reasons including:

Early payment. The Scheme should enable its Scheme Creditors to have their Claims agreed or determined as Final Determined Claims and paid in full considerably sooner than if the run-off of the Scheme Company was to continue until all Claims mature and are paid in the ordinary course. If Claims are determined or agreed under the Scheme as Final Determined Claims, they can be paid as soon as practicable after the Effective Date. It is anticipated that payments to Scheme Creditors with Final Determined Claims will commence within one month of the Effective Date;

No discount for early payment unless projected settlement date of Claim is greater than 5 years. Administration costs which would have been incurred in running off the Scheme Company's relevant books of business over many years should be reduced materially by the Scheme. In recognition of this, the Scheme Company is committing to pay Claims without discount for the time value of money, provided that the Claim is projected to settle within 5 years. Claims with a projected settlement date greater than 5 years will be discounted, including Claims in respect of latent diseases (further details regarding this are set out in Section 5 dealing with the Estimation Methodology). The same discount arrangement will apply to amounts determined to be owing by the Scheme Creditor to the Scheme Company for the purposes of set-off;

Certainty and costs savings. The Scheme should enable its Scheme Creditors to achieve finality in respect of any Claims regarding the Scheme Business. Any concerns which Scheme Creditors may have over the continuation of a Scheme Company's run-off, or over the long-term future solvency of a Scheme Company, will be removed. Scheme Creditors will also benefit from reduced costs in administering their Claims against the applicable Scheme Company over a lengthy period; and

Proceedings. Each Scheme is designed to enable Claims to be dealt with quickly and without protracted litigation, as each Scheme prohibits (without the prior written consent of the relevant Scheme Company), the commencement or continuation of any proceedings outside the mechanisms of the Schemes, where the purpose of such proceedings is to obtain payment of a Claim, or to establish the existence or quantum of a Claim.

In addition to the advantages listed above, each Scheme Company has sought to facilitate the Claims submission and determination process in the following ways:

Practical Claims submission process. A Scheme Creditor may submit and continually revise its Claims up to the Claims Submissions Date (provided that it has not been notified that its Claim has been agreed by the Scheme Company in the meantime). Also, Scheme Creditors may elect to incorporate into their Claim Form, the Claims information which they had already included in their proxy and voting form (for the purpose of voting at the Scheme Meetings), by simply checking the applicable proxy and voting form election box on their Claim Form and resubmitting the Claim Form;

Simplified Claims agreement process. Each Scheme will provide a practical and cost-effective process for agreeing all present and future Claims (including those which may not easily be evaluated, such as incurred but not reported losses (IBNR)), by way of a transparent Estimation Methodology. The Estimation Methodology is set out in Section 5. The Estimation Methodology has been developed by Scott Collings, the Scheme Actuary, who is also the approved actuary for the Australian branch of NRG London and NRG Victory. Mr Collings is a director of the actuarial firm 'Finity Consulting Pty Limited'. Mr Collings prepared the Actuarial Valuation Report of Insurance Liabilities of both the Australian branch of NRG London and NRG Victory as at 31 December 2005.

The Estimation Methodology provides Scheme Creditors with guidance on how all Claims (including Notified Outstanding Claims and IBNR) should be calculated and supported for specific types of Claim.
In the event that agreement cannot be reached between a Scheme Company and a Scheme Creditor in relation to a Claim, the Scheme provides for the final and binding determination of that Claim by the Scheme Adjudicator in what is intended to be a fair and efficient manner.

POSSIBLE DISADVANTAGES OF THE SCHEMES

Scheme Creditors should also be aware of the following possible disadvantages in considering the Schemes:

Estimation. The simplified Claims agreement process has been designed to deal with Claims (including Notified Outstanding Claims and IBNR) as accurately and fairly as possible (see the main advantages discussed at Section 2.6). The effect of each Scheme will be to commute and terminate a Scheme Creditor's policy with a Scheme Company in return for a once-and-for-all payment. This process will result in certain Claims being estimated, which creates the risk that Scheme Creditors may receive a different amount (either more or less) in respect of their Claims, than would have been the case had the Scheme Business been run-off in the traditional way;

Failure to submit Claim Form(s). To facilitate the acceleration and payment of Claims, each Scheme provides a mechanism for cutting-off Claims. All Claims must be duly submitted on the Claim Form for proportional, non-proportional and IBNR Claims on or prior to the Claims Submission Date. Claims notified after the Claims Submission Date will be valued at an amount limited to the value of the Scheme Creditor's Claim which had already been finally agreed by the relevant Scheme Company on or before the Effective Date and which remains unpaid (if any). Such amounts will be sent to the relevant Scheme Creditor upon a request being made to Ross Littlewood (see page 3 above for contact details). For the avoidance of doubt, only amounts which have been pre-completed by the relevant Scheme Company on the relevant Scheme Creditor's Claim Form are considered by the relevant Scheme Company to be "finally agreed" for this purpose. To the extent that a Scheme Creditor has no such "finally agreed" Claim, its Claim will be valued at zero, and the relevant Scheme Company will have no further liabilities to it in respect of its Scheme Business. If a Scheme Creditor wishes to receive payment in respect of any other amounts, it must submit a Claim Form, providing the necessary information in respect of its Claims, prior to the Claims Submission Date. Scheme Creditors will not be able to change their Claim Form after the earlier of the Claims Submission Date, and the date they have been notified that their Claim has become an Agreed Claim (Pre Set-Off); and

Impact on Scheme Companies. The Schemes may result in certain large IBNR Claims being submitted, or further information being provided in respect of known Claims, which may significantly increase the Liabilities of the Scheme Companies in respect of the Scheme Business. Theoretically, this could prejudice Scheme Creditors whose Claims are agreed and settled later than others if this material adverse change impacted on the Scheme Companies capacity to pay any remaining Scheme Creditors. However, the Scheme Companies do not believe this is a significant risk given the significant surplus of assets over liabilities of the Scheme Companies, and the capacity of the Scheme Companies to revert to run-off (described in Section 3.17 below).

Sections 2.6 and 2.7 above, set out the main advantages, and possible disadvantages, of the Schemes for Scheme Creditors identified by the Scheme Companies. It is impossible, however, to address each Scheme Creditor's individual circumstances, and as such, it is impossible to regard this list of advantages and disadvantages as exhaustive. Each Scheme Creditor is advised to make its own assessment of how the relevant Scheme would affect its interests. Each Scheme Company considers that the main advantages referred to above outweigh the possible disadvantages.

ATTENDING THE SCHEME MEETINGS

If you are a Scheme Creditor, you are entitled to attend and vote at the relevant Scheme Meeting convened for 15 August 2006, in respect of each Scheme Company against which a Scheme Liability arises. The Scheme Meetings have been convened as directed by the Court, for the purpose of considering and, if thought fit, approving the Scheme in relation to each Scheme Company.
The Scheme Meetings will be held on 15 August 2006, at the offices of the offices of Clayton Utz, Level 34, No 1 O'Connell Street, Sydney, NSW 2000, commencing at 10:00 am (Sydney time), in respect of the NRG London (Australian branch) Scheme and 10:30 am, (Sydney time), in respect of the NRG Victory Scheme.
Each Scheme Company is of the view that all Scheme Creditors should vote at any applicable Scheme Meeting, irrespective of whether they have proportional, non-proportional or IBNR Claims.
Each Scheme Company considers that one Scheme Meeting for its Scheme is appropriate given that, under the Scheme, Scheme Creditors do not give up or acquire rights which are so dissimilar as to make it impossible for Scheme Creditors to consult together with a view to their common interest.
Notice of the Scheme Meetings is included in Section 7. It may also be obtained by email, fax or post by issuing a postal service request to a Scheme Company using the contact details given on page 3 above.

HOW TO ATTEND AND VOTE AT THE SCHEME MEETINGS

Scheme Creditors may attend the relevant Scheme Meeting in person or by attorney or by proxy.
An individual appointed as corporate representative to attend a Scheme Meeting on behalf of a Scheme Creditor who is a corporation, partnership or other unincorporated body, must bring with him or her to the relevant Scheme Meeting, a form or appointment executed by the corporation either under common seal, or by a director and secretary, by a partner on behalf of the partnership, or by the individual (as the case requires).
Enclosed with this Scheme Booklet is a proxy and voting form, to be used for voting at the Scheme Meetings. The proxy and voting form can be used for all Claims against all Scheme Companies. A copy of the proxy and voting form can be found in Section 8 of the Scheme Booklet.
Each Scheme Creditor should indicate on the proxy and voting form how it intends to vote in respect of each Scheme Company against which it maintains a Claim.
To assist Scheme Creditors, where the relevant Scheme Company has sufficient information to do so, it will pre-complete the proxy and voting form of known Scheme Creditors, indicating its estimate of the value of the Scheme Creditor's Claims. No estimate will be included for IBNR, as the Scheme Companies do not provide for IBNR on a Scheme Creditor by Scheme Creditor basis.
Any details of Claims provided are intended to assist Scheme Creditors in completing their proxy and voting form and should not be regarded as a complete and accurate list of all Claims of a Scheme Creditor that may be affected by the Scheme. The Scheme Creditor may accept this statement of Claims and value, or may alter the details. The proxy and voting form must be returned to the Scheme Company. Scheme Companies, (re)insurance brokers, agents or intermediaries may be able to assist Scheme Creditors in confirming or identifying Claims.
Further copies of the proxy and voting form are available upon request to the relevant Scheme Company (see page 3 above for contact details). Whether or not Scheme Creditors intend to be present in person at the relevant Scheme Meeting, they are requested to complete and sign the proxy and voting form in accordance with the instructions printed on the proxy and voting form to the Scheme Company c/o the person and address specified on page 3, above and the Guidance Notes accompanying the proxy and voting form and return the proxy and voting form as soon as possible, and in any event so that they are received by 5:00 pm (Sydney time) on 11 August 2006.
Appointing a proxy will not prevent a Scheme Creditor from attending and voting in person at the relevant Scheme Meeting. However, a proxy will not be able to vote if the relevant Scheme Creditor attends the relevant Scheme Meeting and votes in person.
Proxy and voting forms may also be handed in at the registration desk at the relevant Scheme Meeting prior to the commencement of the Scheme Meeting.
Please note that faxed and emailed forms of proxy and voting forms will only be accepted if they are legible.
Each Scheme Company would like as many votes as possible to be cast at its Scheme Meeting (whether in person or by proxy). Each Scheme Creditor is therefore encouraged to sign and return its proxy and voting form as soon as possible.

VALUE OF CLAIMS FOR VOTING PURPOSES

The value to be attributed for voting purposes to a Scheme Creditor's Claim will be determined by the Chairperson of the relevant Scheme Meeting based on the Chairperson's estimate of the Scheme Company's net liability to the Scheme Creditor in respect of the Claim after any deduction, set-off or cross-claim. The chairperson will be Nancy Milne (see Section 10.9 for further details) and Ian Hutchinson in her absence. In the event that either Nancy Milne or Ian Hutchinson has a conflict of interest in relation to the determination of any issue the subject of the Scheme Meetings, the Scheme Adjudicator will be the chairperson for the purpose of making any decision or determination in relation to which Nancy Milne or Ian Hutchinson has such a conflict.
The Chairperson's determination shall be based on:

the information provided by the relevant Scheme Creditor;

the information available to the relevant Scheme Company from its existing records; and

advice from the Scheme Actuary (who will be present at the Scheme Meetings) applying the principles described in the Estimation Methodology. Account will also be taken of any known deduction, set‑off or cross‑claim. If the sum of the deduction, set-off or cross-claim exceeds the value of the Claim, the value of the Claim for voting purposes will be zero.

For the purposes of voting at the Scheme Meetings, Claims will be converted into Australian dollars at the closing mid-market rate of exchange for the relevant currency, quoted on the Reserve Bank of Australia website, 2 Business Days prior to the Scheme Meetings (being 11 August 2006).
The Chairperson has the power to reject a Claim, in whole or in part, for voting purposes only if the Chairperson considers that it does not represent a reasonable assessment of the sum due from a Scheme Company. The decision of the Chairperson as to the value to be placed on a Claim for voting purposes is final (subject to an overriding decision of the Court at the second court hearing). Where the Chairperson has amended a Scheme Creditor's assessment of the value of its Claims for voting purposes, the Chairperson will, if possible, notify the relevant Scheme Creditor of such amendment, and the reasons for the amendment before the Scheme Meetings and, in any event, after the Scheme Meeting but before the second court hearing.

CONSEQUENCES OF VOTING AT SCHEME MEETINGS

The amount of a Claim admitted for voting purposes will not constitute an admission of the existence or amount of any Claim, and will not bind any Scheme Company or Scheme Creditor, unless the Scheme Creditor accepts the value of the Claim set out in the pre-completed proxy and voting form.
Scheme Creditors should note that information and estimates provided in relation to the proxy and voting form may not be protected by legal professional privilege and may be required to be disclosed in any relevant future legal proceedings. Scheme Creditors should consult their own legal advisers as to the consequences of furnishing such particulars in the event that they are, or may become, involved in any litigation.

SUMMARY OF THE OPERATION OF THE SCHEMES ONCE THEY HAVE BECOME EFFECTIVE

INTRODUCTION

This Section describes the main provisions of the Schemes once they have become effective. However, this summary should not be relied upon as a substitute for reading the Schemes (set out in Section 6) in their entirety.

PROHIBITED ACTS

The Schemes will prohibit the commencement (or continuation) of any Proceedings by a Scheme Creditor against a Scheme Company, or its Property, in relation to any Scheme Business, unless the Scheme Creditor has first obtained written consent from the relevant Scheme Company.
Each Scheme will also prohibit Scheme Creditors from commencing or continuing any Proceedings or other regulatory process against the relevant Scheme Company or its Property, for the purpose of obtaining payment in whole or in part, either directly or indirectly, of any Claim, arising in relation to the Scheme Business except:

in relation to an Final Determined Claim determined in accordance with the terms of the relevant Scheme where the relevant Scheme Company has failed to make payment of that Final Determined Claim to the Scheme Creditor in accordance with the terms of the relevant Scheme; or

in relation to an act, omission or decision of a person administering the Scheme, in accordance with section 1321(a) of the Corporations Act (see Section 3.20 and 3.21).

CONSEQUENCES OF PROHIBITED ACTS

If a Scheme Creditor does commence or continue Proceedings against a Scheme Company or its Property after the Effective Date and receives money, Property or any other benefit, it will be treated as having received an advance payment on any Final Determined Claim due to it. Consequently, any entitlement to payment in respect of a Final Determined Claim under a Scheme will be reduced to an amount determined by the relevant Scheme Company after taking into account, amongst other things, the money, Property or other benefit received by the Scheme Creditor, as well as any costs incurred by the Scheme Company as a result of the Proceedings.
If any such advance payment to a Scheme Creditor exceeds the amount of its Final Determined Claim, the Scheme Creditor will be required to repay the balance immediately to the relevant Scheme Company to the extent permitted by law. These provisions will operate without prejudice to any rights of action the relevant Scheme Company may have against such a Scheme Creditor.

INTEREST

Scheme Creditors will be entitled to receive interest as part of their Final Determined Claim where they are entitled to such interest by reason of contract, statute or other relevant law. Such interest will be calculated from the date provided for in the relevant contract, statute or law, to the day prior to the date on which payment is made in respect of such Final Determined Claim, in accordance with the relevant Scheme. Scheme Creditors will also be entitled to receive default interest (calculated in accordance with the Scheme) on Final Determined Claims, where such Final Determined Claim has been finally agreed or otherwise determined, but remains unpaid by the relevant Scheme Company for 90 days or longer from the date of such agreement or determination. No other interest will be payable.

CURRENCY CONVERSION

Claims and Agreed Claims (Pre Set-Off) will be denominated in the currency provided by the relevant Reinsurance Contract(s). Where the amount to be applied in set-off against the Scheme Creditor's aggregate Agreed Claim (Pre Set-Off) is payable in a different currency to the currency of the Agreed Claim (Pre Set-Off), the amount to be applied in set-off shall be converted to the relevant currency of the Agreed Claim (Pre Set-Off), at the Relevant Rate of Exchange (as defined in the applicable Scheme).
Final Determined Claims shall be denominated and paid in the predominant currency in which the Claims arise, unless otherwise requested by a Scheme Creditor (however, each Scheme Company has sole discretion whether or not to agree to such request).

DISTRIBUTION OF CLAIM FORMS

Once the Schemes become effective, the Scheme Companies will, as soon as reasonably practicable after the Effective Date, send notice by post to:

all persons who, according to a Scheme Company's records, have or may have a Claim under an insurance or reinsurance contract written by or on behalf of the Scheme Company;

the manager of ANIP, ANIP Pty Ltd, for distribution to such persons as it sees fit;

all licensed Australian general insurers; and

all known brokers and agents identified as having placed Scheme Business with a Scheme Company, or known to be acting on behalf of Scheme Creditors. Brokers and agents are urged to notify all possible Scheme Creditors of the action that they should consider taking with regard to the Scheme and to advise Scheme Creditors to complete and submit their Claim Forms by the Claims Submission Date.

The Scheme Companies will also place advertisements in The Australian, The Australian Financial Review, The National Business Review (NZ), The New Straits Times, Papua New Guinea Post-Courier and other national newspapers distributed in the Pacific Islands (these being the same newspapers and publications in which the Scheme Meetings are being advertised), calling for Scheme Creditors to complete and submit Claim Forms.
To assist Scheme Creditors, where the Scheme Company has sufficient information to do so, it will pre-complete each Claim Form sent to any Scheme Creditor known to it (at the Effective Date) with its estimate of the value of the Scheme Creditor's Claims. Scheme Creditors will not be required to submit a Claim Form or provide any supporting information if they agree with the pre-completed amounts. No amount will be pre-completed in respect of IBNR.
Scheme Creditors will be required to complete or correct their Claim Form, making such amendments or additions to the details as may be necessary, and to submit the Claim Form to the relevant Scheme Company, together with any appropriate supporting information (as described in the Guidance Notes to the Claim Form and in the Estimation Methodology). Scheme Creditors are requested to submit Claim Forms by email (provided any attachments are submitted in Microsoft Word, Microsoft Excel or pdf format only), fax or post, in accordance with the instructions set out in the Guidance Notes attached to the Claim Form.
Any details on Claim Forms that have been pre-completed by the Scheme Company are intended to assist the Scheme Creditor in completing its Claim Form, and should not be regarded as a complete and accurate list of all Claims of a Scheme Creditor that may be affected by the Scheme.
If a Scheme Company becomes aware of the existence of a Scheme Creditor after the Effective Date, but before the Claims Submission Date, it shall send the above mentioned notice to that Scheme Creditor as soon as reasonably practicable and, if practicable, before the Claims Submission Date.

COMPLETING CLAIM FORMS AND SET-OFF

As mentioned above, Scheme Creditors will be invited to submit details of their Claims to be taken into account in determining their Agreed Claims (Pre Set-Off), and to supply documents and other information in support of such Claims. An Estimation Methodology is set out in Section 5 to provide guidance to Scheme Creditors in estimating their Claims. The purpose of the Estimation Methodology is to illustrate the techniques that will be employed by each Scheme Company, in association with the Scheme Actuary (as and when required), in reviewing Scheme Creditors' Claims. The Estimation Methodology also sets out the supporting evidence that the relevant Scheme Company will expect to see in relation to Scheme Creditors' Claims.
Scheme Creditors will also be invited to submit details of any sums which they owe to a Scheme Company, which are to be set-off in reduction of the Claims of that Scheme Creditor against the relevant Scheme Company. Where there are mutual balances due between a Scheme Company and a Scheme Creditor (including, but not limited to, contingent, prospective and unliquidated balances), it is administratively convenient for those balances to be set-off against each other, leaving a net balance due to, or from, a Scheme Creditor. Only the balance remaining after the application of set-off shall be payable by the Scheme Company or the Scheme Creditor (as appropriate).
Each Scheme Creditor is requested to complete its Claim Form in accordance with the instructions on the Claim Form, (a copy of which is set out in Section 9), and to submit it by email, fax or post so as to reach the Scheme Companies at any time on or before the Claims Submission Date.
Scheme Creditors should note that particulars as to the estimates of the amount of any future Claims, furnished by a Scheme Creditor, may not be protected by legal professional privilege under Australian law, and may be discoverable at the insistence of a third party with a Claim against the Scheme Creditor, in any action or Proceedings to which the Scheme Creditor may be party. Scheme Creditors should consult their legal advisers as to the consequences of furnishing such particulars in the event that they are, or may become, involved in any litigation with third parties.
Brokers or agents who submit Claim Forms on behalf of their clients who are Scheme Creditors are requested to provide evidence of their authority (to act on behalf of such Scheme Creditors) to the applicable Scheme Company.

INCORPORATION OF PROXY AND VOTING FORM MATERIAL

A Scheme Creditor may elect to incorporate into its Claim Form any Claims information (including supporting documentation) which it provided in the proxy and voting form that was submitted for the purpose of voting on the Schemes. In order to make this election, a Scheme Creditor should follow the instructions to make a proxy and voting form election (a copy of which is included at Section 9).
Claims which are not adequately substantiated in the proxy and voting form (or indeed in any Claim Form), may ultimately not be agreed by the relevant Scheme Company.

CLAIMS SUBMISSION DATE AND FAILURE TO SUBMIT CLAIM FORM

The Claims Submission Date will be the last date by which Claim Forms may be received by the Scheme Companies and it will be 11:59 pm, Sydney time, on the first business day falling 120 days after, (and not including), the Effective Date. This date will be notified to Scheme Creditors in the notices and advertisements referred to in Section 3.6.
Each Scheme Creditor will be entitled to submit a new or revised Claim Form and to provide revised or further supporting information to the applicable Scheme Company in respect of its Claims, at any time up to the Claims Submission Date. No Scheme Creditor will have any right after the Claims Submission Date to submit a Claim Form, or a revised Claim Form. A Scheme Creditor may provide revised or further supporting information after the Claims Submission Date in response only to a notice or request from the Scheme Company or the Scheme Adjudicator.

Summary Table
ANet total Claim: specify the total of the entries in column 21.
BTotal owing to the Scheme Company: specify the total of the entries in columns 22 and 23.
CNet balance due to/from Scheme Creditor: this figure is the difference between figures "A" and "B".

You are requested to return this Claim Form, together with supporting information, to the Scheme Company by one of the means described on the Claim Form by the date that is 120 days after the Effective Date.
NRG VICTORY AUSTRALIA LIMITED SCHEME

Claim Form
What is this form: This is a Claim Form in accordance with the scheme of arrangement, between NRG Victory Australia Limited (ABN 47 002 971 477) (the "Scheme Company") and its Scheme Creditors, the subject of the order of the Court on 16 August 2006 and lodged with ASIC on the same date. Unless separately defined in this Claim Form, the defined words and expressions contained within this Claim Form and its accompanying Guidance Notes have the meaning given to them in the Scheme Booklet dated 5 July 2006.
This Claim Form comprises:
·this cover page;
·the Claim Form (Parts A, B and C);
·Guidance Notes for completion of the Summary Table and Detailed Tables; and
·the Summary Table and three Detailed Tables (for non-proportional claims, proportional claims, and IBNR claims).

What to do with this Claim Form: If you are a Scheme Creditor and have a Claim against the Scheme Company, you should complete, execute and return this Claim Form by 11:59 pm (Sydney time) on the date that is 120 days after the Effective Date. If you have no claim against the Scheme Company you need not take any further action. If you have a claim other than in Australian Dollars (AUD), complete and return additional forms for each additional currency.
This document is important and requires your immediate attention. If you are in any doubt as to any aspect of this proposal or as to the action you should take, you should consult your insurance broker or other financial or professional adviser without delay.
Choices in completing this Claim Form: In order to submit your claims against the Scheme Company in relation to the Scheme Business, you can either: (a) elect to incorporate the information that was submitted in your proxy and voting form into this Claim Form by ticking the box on the Claim Form attached; or (b) complete or amend the information contained in the Summary Table and Detailed Tables, and execute and submit your claims against the Scheme Company. You should note that any amendments you may have made to the pre completed voting form do NOT represent agreed claims and will be subject to review per provision 4.5 of the Scheme.
If you tick the box and make amendments, the Scheme Company will consider the amendments as your claim.
To avoid doubt, if there is no change to the information you submitted previously with your proxy and voting form, you need only complete your details on the claim form, place a "ü" in the appropriate currency box, place a "ü" in the box to use the previous details submitted as your claim, sign and return the form. You should note that any amendments you may have made to the pre completed voting form do NOT represent agreed claims and will be subject to review per provision 4.5 of the Scheme.
If you did not submit a proxy and voting form previously, or you believe your claim has changed, you must complete the Summary Table and Detailed Tables.
NRG Victory Australia Limited Scheme
Claim Form
Scheme Creditor Name:
Scheme Creditor Contact:   ___________________________________________________
Address:
Telephone Number: Fax Number:
Email:
Currency: AUD  NZD PGK  USD  GBP Other (please specify)____________
PART A - PROXY AND VOTING FORM ELECTION PROCEDURE
If you agree with the claims information and supporting information that was submitted in the proxy and voting form, you can elect to incorporate this information into this Claim Form by placing a "ü" in the box below. The amount included in that form will become your claim against the Scheme Company. Otherwise proceed to Part B.
PROXY AND VOTING FORM ELECTION:
If you elect to incorporate the information included in the proxy and voting form into this Claim Form, you need only execute Part C and return this form. You do not need to provide any additional details. You should note that any amendments you may have made to the pre completed voting form do NOT represent agreed claims and will be subject to review per provision 4.5 of the Scheme.
PART B - CLAIMS SUBMISSION PROCEDURE
If you have not completed Part A please complete or amend the pre-completed information in the Summary Table and three Detailed Tables.
Any information that has been pre-completed by the Scheme Company is intended to assist you. It is not binding upon you and you may replace or amend any information relating to your Claim if you wish to do so. You should review all pre-completed information carefully to see if it is accurate.
In order to submit your claims against the Scheme Company in relation to the Scheme Business, you must complete and return this Claim Form, along with appropriate supporting information, to the Scheme Company, by email (with attachments in Microsoft Word, Microsoft Excel or pdf format only), by fax, or by post, as soon as possible and by no later than the Final Claims Submission Date, being 11:59 pm (Sydney time) on the 120th day after (but not including), the Effective Date (or if such date is not a Business Day, the first Business Day thereafter). After this date, you will not be entitled to submit a Claim Form or a revised Claim Form and no revised or further information will be accepted (except, in the latter case, in response to a request from the Scheme Company or the Scheme Adjudicator).
(Step 1): Read the Guidance Notes carefully before completing the Summary Table and Detailed Tables.
(Step 2): Complete or amend the individual Detailed Tables making such additions or amendments to the details as may be necessary and provide appropriate supporting information (as described in the Guidance Notes to this Claim Form and in the Estimation Methodology).
Please note that any details of claims provided by the Scheme Company in the Detailed Tables is intended to assist you in completing this Claim Form and should not be regarded as a complete and accurate list of all claims you may have that may be affected by the Scheme.
(Step 3): Following completion of the Detailed Tables, check and amend if necessary the information in the Summary Table.
(Step 4): Execute this Claim Form (Part C) in accordance with the execution instructions.
(Step 5): Submit this Claim Form by the date that is 120 days after the Effective Date to the Scheme Company (attention Ross Littlewood) by email (with any attachments in Microsoft Word, Microsoft Excel or pdf format only) to [email protected], by fax to +(61)(02) 92743033 or by post c/o GPO Box 3973, Sydney, NSW, 2001 Australia. If submitted by email or facsimile, please also post the original.
PART C - EXECUTION (TO BE COMPLETED BY ALL SCHEME CREDITORS)
The Scheme Creditor represents and warrants to the Scheme Company that the information contained in this Claim Form as amended or otherwise and any supporting information, is complete and accurate.

If signed by an individual

Signed by the Scheme Creditor in the presence of:

Signature

Signature of Witness

Name of Witness in full

If signed by an Attorney

Signed for and on behalf of the Scheme Creditor by the Attorney under a Power of Attorney and the Attorney declares that the Attorney has not received any notice of the revocation of such Power of Attorney, in the presence of:

Signature of Attorney

Signature of Witness
Name of Attorney in full

Name of Witness in full

If signed by a Company

Executed by the Scheme Creditor in accordance with section 127 of the Corporations Act or if incorporated outside Australia, in accordance with the laws of its place of incorporation by or in the presence of:

Signature of Secretary/other Director

Signature of Director or Sole Director and Secretary

Name of Secretary/other Director in full Name of Director or Sole Director and Secretary in full
Execution instructions
You must sign this Claim Form as follows in the spaces provided:

Individual the individual must sign in the presence of a witness.

Power of Attorney to sign under Power of Attorney, either the Power of Attorney must have already been lodged with the Scheme Company for notation or the original (or a certified copy) of the Power of Attorney must accompany this document.

Companies the following person(s) must sign:
(a) Australian proprietary company with a sole director who is also the sole company secretary - that person;
(b) Australian proprietary company with a sole director and no company secretary - that person;
(c) other Australian companies - two directors or one director and one company secretary;
(d) foreign company - in accordance with the laws of the jurisdiction of incorporation and constituent documents.

GUIDANCE NOTES
Instructions for the completion of the Summary Table and the Detailed Tables
The Detailed Tables are for incidents arising under non-proportional Reinsurance Contracts, proportional Reinsurance Contracts and any IBNR held thereunder.
You should review your individual list of Reinsurance Contracts, making such amendments or additions to the Detailed Tables as may be necessary and providing appropriate information to support each amendment and/or addition. Your (re)insurance broker, agent or intermediary should be able to assist you in confirming or identifying additional Reinsurance Contracts and reference numbers.
A separate Detailed Table and Summary Table must be completed for each currency in which you have a claim. If you need to complete more than one Detailed Table, please complete the Detailed Tables as required.
You should update the Summary Table as the Detailed Tables are updated. Please check the information in the Summary Table following completion of the Detailed Tables. You should note that all claims submitted will be subject to review per provision 4.5 of the Scheme.
Detailed Tables
1Currency: enter the currency of the claims. A separate Detailed Table needs to be completed in respect of each different currency.
2Scheme Company contract reference: specify the Scheme Company reference number in relation to each Reinsurance Contract under which your claim against the Scheme Company is made.
3Reinsurance Contract name: specify the contract name that identifies the Reinsurance Contract (including type, class/classes of business and layer). This should be as per the original signed slip and/or signed contract wording.
4Underwriting year: specify the underwriting year to which the loss is ceded.
5Priority: specify the original attachment point of the Reinsurance Contract.
6Limit: specify the original maximum payable by the Reinsurance Contract.
7Index date: if the Reinsurance Contract is subject to indexation, specify the applicable indexation date.
8Participation %: specify the percentage line underwritten by the Scheme Company for the Reinsurance Contract.
9Claim name: specify the original insured's name, the event name or some other short description by which the incident is known.
10Date of loss: specify the date on which the loss under the Reinsurance Contract arises. For event based policies, this is the date the incident occurred. For claims made/claims notified policies, this is the date the incident is notified.
11Scheme Creditor claim reference number: specify your claim reference number.
12Scheme Creditor Reinsurance Contract reference number: specify your Reinsurance Contract reference number.
13Broker claim reference number: specify the Broker's (or agent's or intermediary's) claim reference number.
14Broker Reinsurance Contract reference number: specify the Broker's (or agent's or intermediary's) Reinsurance Contract reference number.
15Scheme Company claim reference number: specify the Scheme Company's claim reference number.
16Ground up loss paid: the net amount paid by the Scheme Creditor applicable to the claim (taking into account any recoveries due from proportional reinsurance, subrogation, input tax credits, decreasing adjustments etc).
17Ground up loss outstanding: the reserve held by the Scheme Creditor in respect of future amounts payable to settle the claim in accordance with industry practice. Future care costs should be discounted in accordance with industry practice. Where an amount has been provided by the Scheme Company these will be in accordance with the last advice received from the Scheme Creditor or its Broker.
18Reinsurance Contract incurred: this is the total of columns 16 and 17 applied against columns 5 and 6. Payments which have been made will be adjusted using the applicable indexation rate from the index date in column 7 to the date of each payment. Amounts which have not been paid, will be adjusted using the applicable indexation rate from the index date in column 7 to 30 June 2006.
19Amount due to Scheme Creditor: specify the amount due to the Scheme Creditor from the Scheme Company. For non-proportional claims this is column 18 multiplied by column 8. For proportional claims this is any current treaty account amounts due to the Scheme Creditor from the Scheme Company.
20Amount paid to Scheme Creditor: specify the amount paid to the Scheme Creditor as at 30 June 2006.
21Scheme Company treaty account outstanding claims: this is the amount of outstanding claims as per the last account received multiplied by column 8.
22Amount outstanding to Scheme Creditor: for non-proportional claims this is column 19 minus column 20. For proportional claims this is column 19 plus column 21.
23Reinstatement or burning cost premium due: specify any additional premiums due to the Scheme Company but not yet paid as a result of the claim.
24Unsettled amounts due to Scheme Company: list separately any other amounts in respect of the claims due to the Scheme Company.
25Latent: specify (yes or no) whether the claim is for a latent claim such as asbestos, silica, etc.
26IBNR claims: specify the estimated amount of any claim (or where there is more than one claim the aggregated estimated amount of any claims) you have in respect of losses which have been incurred but not reported to the Scheme Company and which are subject to potential recoveries in supporting schedules in accordance with the Scheme and the Estimation Methodology set out in Section 5 of the Scheme Booklet.
Summary Table
ANet total Claim: specify the total of the entries in column 21.
BTotal owing to the Scheme Company: specify the total of the entries in columns 22 and 23.
CNet balance due to/from Scheme Creditor: this figure is the difference between figures "A" and "B".

You are requested to return this Claim Form, together with supporting information, to the Scheme Company by one of the means described on the Claim Form by the date that is 120 days after the Effective Date.
ADDITIONAL INFORMATION

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at Level 21, Tower Building, Australia Square, 264 George Street, Sydney, NSW, 2000, Australia between the hours of 9.30am and 4:30pm (Sydney time) on business days prior to the date of the Scheme Meetings:

the reports of financial position and financial performance of the Scheme Companies as at 31 December 2005 (although there are no financial reports of the Australian branch of NRG London distinct from the financial reports of NRG London as a whole); and

the constitutions of each Scheme Company.

The Scheme Companies will post a copy of the financial reports referred to in (a) above, to any Scheme Creditor upon request.

IMPACT ON NON-SCHEME CREDITORS OF SCHEME COMPANIES

The Schemes will not affect the interests of creditors of the Scheme Companies, other than the Scheme Creditors.
The Scheme Companies have paid and are paying all of their respective creditors within normal terms of trade. Each Scheme Company is solvent and is trading in an ordinary commercial manner.

AUTHORISATIONS UNDER INSURANCE ACT 1973

NRG London (Australian branch)

NRG London authorisation under the Insurance Act 1973 provides that:
"1NRG London Reinsurance Company Limited may only conduct insurance business in Australia for the sole purpose of discharging liabilities under policies entered into prior to 18 June 2002.
2Assets in Australia of NRG London Reinsurance Company Limited are not to be:
a) removed from Australia;
b) used to discharge liabilities outside Australia; or
c) charged for the benefit of any person outside Australia
EXCEPT
i)to discharge NRG London Reinsurance Company Limited's liabilities under insurance contracts in respect of which premiums are remitted to Australia;
ii)to make premium payments due outside Australia under reinsurance arrangements approved by APRA; and
iii)where APRA's consent in writing is obtained beforehand."

NRG Victory

The authorisation of NRG Victory under the Insurance Act 1973 provides that:
"1The Company may only conduct insurance business in Australia for the sole purpose of discharging liabilities that arose under policies entered into prior to October 1993.
2The Board of the Company must have a minimum of 3 directors.
3It is intended that the requirement in condition 2 shall apply to the Company to the exclusion of paragraphs 18(a) and 20 of Prudential Standard GPS 220 made under s 32 of the Act, but without prejudice to the Company's obligation to otherwise comply with prudential standards and guidance notes."

APRA

A copy of this Scheme Booklet has been provided to APRA. Neither APRA nor any of its officers take any responsibility for the contents of this Scheme Booklet. APRA has no formal role in relation to schemes of arrangement pursuant to section 411 of the Corporations Act, but in its capacity of prudential regulator of general insurers has confirmed by letter of 29 June 2006 that it has no objection to the Schemes proceeding.

ASIC

A copy of this Scheme Booklet has been lodged with ASIC under section 412(6) of the Corporations Act. ASIC has been requested to provide a statement that ASIC has no objection to the Schemes. If ASIC provides this statement, then it will be produced to the Court at the time of the Court hearing to approve the Schemes. Neither ASIC nor any of its officers takes any responsibility for the contents of this Scheme Booklet.
ASIC has granted the Scheme Companies relief from disclosure of material otherwise required by paragraphs 8201 and sub-paragraphs 8203(a), (b) and (d), of Part 2 of Schedule 8 of the Corporations Regulations 2001 (Cth).

DIRECTORS AND DIRECTORS' INTERESTS

The directors of the Scheme Companies are:

NRG London Reinsurance Company Limited

NRG Victory Australia Limited

Martin Richard Baker
Alan John Boyce
Willem (Bill) Klaas Dikland
Laurence Royden Maxfield
Paul Mitchelson

Willem (Bill) Klaas Dikland
Ross Littlewood
Nancy Jane Milne

None of the directors has any material interests (whether as director or as member or as creditor of any Scheme Company of which he is a director) in the matters that are proposed to be subject to the Schemes except as disclosed in this Scheme Booklet. In particular:

none of the directors of the Scheme Companies is a Scheme Creditor or shareholder of the Scheme Companies; and

the Schemes will not affect the directors' interest in or as directors of the Scheme Companies and no additional remuneration will be received by them under the terms of the Schemes.

Ms Milne and Mr Hutchinson, chairperson and alternate chairperson of the Scheme Meetings, are however directors of Zurich Pty Ltd which is a potential Scheme Creditor.

SCHEME ADJUDICATOR AND SCHEME ADJUDICATOR'S INTERESTS

The Scheme Adjudicator is Mark Moyes.
Experience
Mark Moyes is the Managing Director of the consultancy firm 3 red Pty Ltd. He has extensive knowledge of international insurance transactions and of Asia Pacific insurance and reinsurance. Mr Moyes has worked in the insurance industry for over 30 years. Prior to joining 3 red Pty Ltd, he was the Chief Executive Officer of the Claims Management Group Limited, Asia Pacific (from April 2005 to February 2006) and Reinsurance Australia Corporation Limited, Run-off Services (from March 1994 to March 2005). Mr Moyes has broad market experience in insurance claims management and related services provided to insurance and reinsurance companies such as reinsurance debt collection and run-off of insurance liabilities.
Mr Moyes has advised insurance and reinsurance companies, self-insurers and governments on all aspects of their insurance business, ranging from claims management advice and service to self-managed run-off.
Mr Moyes received his LLB from the University of Technology, Sydney in 1984 and was admitted as a Barrister of the Supreme Court of New South Wales in 1988. He has published a number of articles for the Australian Insurance Institute Journal.
Interests
Any remuneration, costs, charges and expenses incurred by the Scheme Adjudicator shall be paid by the Scheme Companies except that, in respect of a particular Disputed Claim, the Scheme Adjudicator may apportion his remuneration, costs, charges and expenses between the relevant Scheme Company and the Scheme Creditor (see clause 4.6(j) of the Scheme). Whilst the Scheme Companies may, at the option of the Scheme Adjudicator, discharge the remuneration, costs, charges and expenses apportioned to the Scheme Creditor, the Scheme Creditor shall be obligated to reimburse the relevant Scheme Company any amounts so discharged. The Scheme Company may, in its absolute discretion, deduct any amount to be paid by the Scheme Creditor to the Scheme Adjudicator from the Scheme Creditor's Agreed Claim (Pre Set-Off).
The Scheme Adjudicator is not a Scheme Creditor, shareholder or director of either Scheme Company. The Scheme Adjudicator's remuneration is not dependent on the level at which Claims are adjudicated under the Scheme.

SCHEME ACTUARY AND SCHEME ACTUARY'S INTEREST

The Scheme Actuary is Scott Collings of Finity Consulting Pty Limited.
Experience
Scott Collings is a Fellow of the Institute of Actuaries of Australia and a Director of Finity Consulting Pty Limited. He has been employed by Finity Consulting Pty Limited (formerly Trowbridge) since 1988. Mr Collings qualified as an actuary in 1994 after graduating from the University of New South Wales in 1988 with honours in electrical engineering. He is based in Finity Consulting Pty Limited's Sydney office.
During his 18 years of general insurance consulting, Mr Collings has been involved in a wide range of projects covering pricing, reserving and capital management advice to private sector insurers and reinsurers, as well as government accident compensation schemes. In particular, he has been employed as a consultant by NRG Victory and NRG London for over 10 years, providing actuarial valuation and related services. He is currently Approved Actuary to four licensed general insurers: NRG Victory, NRG London, Lumley General Insurance and Wesfarmers Federation Insurance. As part of his responsibilities as the Approved Actuary to NRG Victory and NRG London, Mr Collings provides advice to the Scheme Companies in respect of its reserves.
Mr Colling's responsibilities at Finity Consulting Pty Limited include managing the firm's Volatility and Capital Management (VCM) practice. Within the VCM practice he has prepared advice for a number of major local and overseas insurers with a focus on capital management issues such as the development of operational capital targets, risk-based allocation of capital, dividend strategy, asset mix optimisation and the analysis and restructuring of reinsurance programs.
Interests
The Scheme Actuary is not a Scheme Creditor, shareholder or director of either Scheme Company. The Scheme Actuary's fees will be payable by the Scheme Companies. The Scheme Actuary's remuneration is not dependent upon the level at which Claims are agreed under the Schemes.

CHAIRPERSON AND CHAIRPERSON'S INTEREST

The chairperson is Nancy Milne.
Experience
Ms Milne is an experienced company director. She is currently chairperson of Recovre Holdings Limited and director of a number of companies including NRG Victory, Zurich Pty Ltd and Munich Holdings Australasia Limited.
Ms Milne is also one of Australia's leading insurance and reinsurance lawyers with over 20 years experience. She is a consultant to and former partner of Clayton Utz and has acted for insureds, insurers, fund managers, professional organisations, and directors.
Ms Milne is currently the Chair of the International Bar Association's Insurance Committee. She is a member of the International Insurance Society and the Australian Insurance Law Association.
In 2003, Ms Milne was appointed by The Minister for Revenue and Assistant Treasurer, and Parliament Secretary to the Treasurer, to conduct a review of the Insurance Contracts Act 1984 with Mr Alan Cameron AM. This appointment recognised Ms Milne's pre-eminent position in the financial services industry. In addition, she was appointed as one of six non-government members of the Commonwealth's Medical Indemnity Policy Review Panel.
Interests
Ms Milne is not a Scheme Creditor of either Scheme Company. Ms Milne is a director of NRG Victory. Ms Milne is also a director of Zurich Pty Ltd which is a potential Scheme Creditor.

LEGAL ADVISERS' INTEREST

Clayton Utz is the Australian legal adviser to the Scheme Companies in relation to the Schemes.
It is not a Scheme Creditor, shareholder or director of either Scheme Company (although Nancy Milne, a director of NRG Victory, is a consultant to and was a former partner of Clayton Utz). Clayton Utz's fees are payable by the Scheme Companies.
Clayton Utz is named for information purposes only and:

has not authorised or caused the issue of this Scheme Booklet;

has not made any statement in this Scheme Booklet, or any statement on which any statement in this Scheme Booklet is based; and

to the maximum extent permitted by law, expressly disclaims and take no responsibility for any statements in or omissions from this Scheme Booklet.

NO OTHER MATERIAL INFORMATION

Other than as set out in this Scheme Booklet, each Scheme Company is not aware of any information that is material to the making of a decision by a Scheme Creditor as to how to vote in respect of each Scheme.

DATE OF SCHEME BOOKLET

This Scheme Booklet is dated 5 July 2006.

SUMMARY TABLE AND DETAILED TABLES

The Summary Table and Detailed Tables that follow form part of each proxy and voting form in Section 8 and each Claim Form in Section 9.

SCHEME CREDITOR NAME:

CURRENCY: AUD

SUMMARY TABLE

See the "Guidance Notes" to complete. Please complete a separate Summary Table and Detailed Tables for each different currency in which you have a claim.

Claim type Total Claim Total owing to Scheme Company Net balance due to/from Scheme Company

(A) (B) (A - B = C)

Non-proportional Claim   -         -     -

Proportional Claim   -     -     -

IBNR Claim   -     -     -

TOTAL CLAIM   -     -     -

DETAILED TABLE

NON-PROPORTIONAL CLAIMS

1   Currency AUD

2 3 4 5 6 7 8 9 10 11 13 15 16 17 18 19 20 22 23 24

Scheme Company contract reference Reinsurance Contract name Underwriting year Priority Limit Index date Participation % Claim name Date of Loss Scheme Creditor claim reference number Broker claim reference number Scheme Company claim reference number Ground up loss paid Ground up loss outstanding Reinsurance Contract incurred Amount due to Scheme Creditor Amount paid to Scheme Creditor Amount outstanding to Scheme Creditor Reinstatement or burning cost premium due Unsettled amounts due to Scheme Company

(A) Total Claim             -

(B) Totals owing to Scheme Company                -               -

DETAILED TABLE

PROPORTIONAL CLAIMS

1 Currency AUD

2 3 4 8 12 14 19 21 22 24

Scheme Company contract reference Reinsurance Contract name Underwriting year Participation % Scheme Creditor Reinsurance Contract reference number Broker Reinsurance Contract reference number Amount due to Scheme Creditor Scheme Company Treaty Account outstanding claims Amount outstanding to Scheme Creditor Unsettled amounts due to Scheme Company

(A) Total Claim   -

(B) Total owing to Scheme Company              -

DETAILED TABLE

IBNR CLAIMS

1   Currency AUD

2 4 8 12 14 25 26

Scheme Company contract reference Underwriting year Participation % Scheme Creditor Reinsurance Contract reference number Broker Reinsurance Contract reference number Latent IBNR claim

(A) Total Claim   -

DEFINITIONS

The following definitions are summary definitions used in the Scheme Booklet. They are qualified in their entirety by the definitions within the Schemes set out in Section 6.
In this Scheme Booklet, unless the context otherwise requires:
“Agreed Claim (Pre Set-Off)” means the amount agreed, determined or otherwise adjudicated as being due in respect of a Scheme Creditor's Claim prior to set-off and relevant deductions in accordance with the relevant Scheme.
“Alternative Claim Form” means the claim form setting out the values a Scheme Company is prepared to accept in respect of a Scheme Creditors’ Claim.
"ANIP" means the Australian Nuclear Insurance Pool.
“APRA” means the Australian Prudential Regulation Authority.
“ASIC” means Australian Securities and Investments Commission.
"Best Estimate" means the average of the distribution of outcomes. A best estimate basis should be used by all Scheme Creditors when estimating Claim reserves.
“Business Day” means any day other than a Saturday, Sunday or public holiday on which banks are not generally open for business in Sydney.

“Chairperson” in respect of a Scheme Meeting, means Nancy Milne or in her absence, Ian Hutchinson, except that in the case of any decision or determination in relation to which Nancy Milne or Ian Hutchinson has a conflict of interest, the chairperson will be Mark Moyes, the Scheme Adjudicator.
“Claim” means any claim against a Scheme Company in respect of a Liability under or in relation to a Reinsurance Contract written by or on behalf of a Scheme Company.
“Claim Form” means the form to be sent out to Scheme Creditors in accordance with a Scheme and to be completed by Scheme Creditors prior to the Claims Submission Date in order to have their Claims against the applicable Scheme Company agreed or determined.
“Claims Submission Date” means the deadline for submitting completed Claim Forms, being 120 days after the Effective Date.
“Corporations Act” means the Corporations Act 2001 (Cth).
“Court” means the Federal Court of Australia.
“Disputed Claim” means a Claim referred to the Scheme Adjudicator.
“Disputed Final Determined Claim Notice” means the notice that a Scheme Creditor must issue to the Scheme Company within 30 days of the Final Determined Claim Notification Date disputing the value which the Scheme Company has attributed to its Final Determined Claim.
“Dispute Resolution Procedure” means the process of adjudication of Disputed Claims by the Scheme Adjudicator.
“Effective Date” means, in relation to each Scheme Company, the date on which the office copy of the Court order is lodged with ASIC.
“Estimation Methodology” means the methodology used in determining Claims as set out in Section 5.
“Excluded Liabilities” means any Liability in respect of:
(a)in the case of NRG London (Australian branch), Reinsurance Contracts not written through its Australian branch;
(b)in the case of NRG Victory, Reinsurance Contracts which were transferred to Life Reinsurance of Australasia in 1993 (now Hannover Life Re of Australasia Ltd) under the Life Insurance Act 1945 (Cth).

“Final Determined Claim” means an amount agreed, determined or otherwise adjudicated as being due in respect of the Scheme Creditor's Claim after set-off and relevant deductions applied pursuant to the relevant Scheme.
“Final Determined Claim Notification Date” means the date a Scheme Company notifies a Scheme Creditor of the value attributed to its Final Determined Claim following its determination.
"GST" has the meaning given to it in the A New Tax System (Goods and Services Tax) Act 1999 (Cth).
"Guidance Notes" means the guidance notes in respect of the Claim Form explaining how to access, obtain, complete, amend and submit a Claim Form, and the manner in which a Scheme Creditor may provide any supporting documentation to the Scheme Company.
“IBNR” means Scheme Liabilities of a Scheme Creditor in respect of losses which as at the Valuation Date have been incurred but not yet reported by the Scheme Creditor to a Scheme Company.
"IBNR Claims" means a Claim under a Reinsurance Contract based on Liabilities of the Scheme Company, in respect of losses which have been incurred but have not been reported to the Scheme Company, and which are subject to potential recoveries under a Reinsurance Contract with the Scheme Company.
“Liability” means any debt or liability (being a liability to pay money or money's worth) of a person whether it is present or future, certain or contingent, whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion, including any liability under any enactment (in Australia or in any other jurisdiction) and any liability in contract, tort or bailment or arising out of an obligation to make restitution or in any manner whatsoever provided that such expression does not include any debt or liability which is barred by statute under Australian law or the law of any other jurisdiction which applies to that liability or is otherwise unenforceable. For the avoidance of doubt, where any obligation or liability under a contract or policy is void or, being voidable, have been duly avoided, no obligation or liability shall arise in respect of such obligation or liability.
“Long Stop Date” means the expiry date for any Claim which has not been agreed between a Scheme Company and its Scheme Creditor by 11:59 pm Sydney time on the day on which the period of 365 days from the Claims Submission Date has elapsed.
“Notified Outstanding Claims” means a Claim under a Reinsurance Contract based on Liabilities of a Scheme Company in respect of losses which have been notified to the Scheme Company but not yet become Paid Losses and which are subject to potential recoveries under a Reinsurance Contract.
“NRG London” means NRG London Reinsurance Company Limited ABN 77 001 160 792.
“NRG Victory” means NRG Victory Australia Limited ABN 47 002 971 477.
“Paid Losses” means Liabilities of the Scheme Company in respect of losses of a Scheme Creditor arising pursuant to Scheme Business which have been notified to the Scheme Company which are certain in amount.
“Proceedings” means any form of proceedings in any jurisdiction or forum including, without limitation, any legal proceedings, demand, arbitration, alternative dispute resolution procedure, judicial review, adjudication, mediation, execution, seizure, distraint, forfeiture, re-entry, enforcement of judgment or enforcement of any security or any step taken for the purpose of creating or enforcing a lien.
“Property” means all forms of property and obligations (including money, goods, things in action, land and every description of property wherever situated) and every description of interest, whether present, future, vested or contingent or arising out of or incidental to, property and including for the avoidance of doubt, all contributions to the assets of the relevant Scheme Company.
“Reinsurance Contract” means any inwards contract or policy of insurance, reinsurance or retrocession of any kind whatsoever in respect of which a Scheme Company may have Liabilities except those in respect of which the Liability of the Scheme Company would be an Excluded Liability.
“Schemes” means the schemes of arrangement pursuant to section 411 of the Corporations Act.
“Scheme Actuary” means Scott Collings of Finity Consulting Pty Limited and any person subsequently appointed to be the Scheme Actuary.
“Scheme Adjudicator” means Mark Moyes of 3 red Pty Ltd and any person subsequently appointed to be a Scheme Adjudicator.
“Scheme Business” means all of a Scheme Company's Reinsurance Contracts.
“Scheme Company” means NRG London or NRG Victory or both of them as the case requires.
“Scheme Creditor” means, in relation to a particular Scheme Company, a person who is or claims to be a creditor of that Scheme Company in respect of a Claim.
“Scheme Liability” means any Liability (not being an Excluded Liability) to which a Scheme Company is subject as at the Valuation Date in respect of a Reinsurance Contract.
“Scheme Meetings” means each of the meetings of the Scheme Creditors for a Scheme Company to consider and vote on each Scheme.
“Valuation Date” means the date as at which the Scheme Liabilities will be valued, namely 30 June 2006.

Scheme Companies
NRG London Reinsurance Company Limited Level 21, Tower Building Australia Square 264 George Street Sydney NSW 2000 Australia	Contact: Ross Littlewood Tel: +(61) (02) 9274 3000 Fax: +(61) (02) 9274 3033 Email: [email protected]
NRG Victory Australia Limited Level 21, Tower Building Australia Square 264 George Street Sydney NSW 2000 Australia	Contact: Ross Littlewood Tel: +(61) (02) 9274 3000 Fax: +(61) (02) 9274 3033 Email: [email protected]
Scheme Actuary
Scott Collings Finity Consulting Pty Limited Level 7, 155 George Street The Rocks NSW 2000 Australia	Contacts: Scott Collings/Adam Payne Tel: +(61) (02) 8252 3300 Fax: +(61) (02) 8252 3399 Email: [email protected] [email protected]
Australian Legal Advisers
Clayton Utz Levels 22-35 No 1 O'Connell Street Sydney NSW 2000 Australia	Contacts: Michael Parshall/Nicholas Mavrakis/ Peter Mann Tel: +(61) (02) 9353 4000 Fax: +(61) (02) 82206700 Email: [email protected] [email protected] [email protected]
Scheme Adjudicator
Postal address: Mark Moyes 3 red Pty Ltd PO Box 761 Woollahra NSW 1350 Australia Registered office: Mark Moyes 3 red Pty Ltd 173 Sutherland Street Paddington NSW 2021	Contact: Mark Moyes Tel: +(61) (0) 410 464 362 Fax: +(61) (02) 9327 3601 Email: [email protected]

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1125 OF 2005

NRG LONDON REINSURANCE COMPANY LIMITED (ABN 77 001 160 792) NRG LONDON REINSURANCE COMPANY LIMITED (ABN 47 002 971 477) Plaintiffs
JUDGE:	LINDGREN J
DATE OF ORDER:	5 JULY 2006
WHERE MADE:	SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1125 OF 2005

Counsel for the Plaintiffs:	Mr J T Gleeson SC and Mr N J Owens
Solicitor for the Plaintiffs:	Clayton Utz
Date of Hearing:	3, 4, 5 July 2006
Date of Judgment:	5 July 2006

Signed by the Scheme Creditor in the presence of:
Signed by the Scheme Creditor in the presence of:	Signature
Signature of Witness
Name of Witness in full

Signed for and on behalf of the Scheme Creditor by the Attorney under a Power of Attorney and the Attorney declares that the Attorney has not received any notice of the revocation of such Power of Attorney, in the presence of:
	Signature of Attorney
Signature of Witness	Name of Attorney in full
Name of Witness in full

Executed by the Scheme Creditor in accordance with section 127 of the Corporations Act or if incorporated outside Australia, in accordance with the laws of its place of incorporation by or in the presence of:
Signature of Secretary/other Director	Signature of Director or Sole Director and Secretary
Name of Secretary/other Director in full	Name of Director or Sole Director and Secretary in full

Individual	the individual must sign in the presence of a witness.
Power of Attorney	to sign under Power of Attorney, either the Power of Attorney must have already been lodged with the Scheme Company for notation or the original (or a certified copy) of the Power of Attorney must accompany this document.
Companies	the following person(s) must sign: (a) Australian proprietary company with a sole director who is also the sole company secretary - that person; (b) Australian proprietary company with a sole director and no company secretary - that person; (c) other Australian companies - two directors or one director and one company secretary; (d) foreign company - in accordance with the laws of the jurisdiction of incorporation and constituent documents.

NRG London Reinsurance Company Limited	NRG Victory Australia Limited
Martin Richard Baker Alan John Boyce Willem (Bill) Klaas Dikland Laurence Royden Maxfield Paul Mitchelson	Willem (Bill) Klaas Dikland Ross Littlewood Nancy Jane Milne

SCHEME CREDITOR NAME:
CURRENCY:	AUD
SUMMARY TABLE
See the "Guidance Notes" to complete. Please complete a separate Summary Table and Detailed Tables for each different currency in which you have a claim.
Claim type	Total Claim	Total owing to Scheme Company	Net balance due to/from Scheme Company
(A)	(B)	(A - B = C)
Non-proportional Claim	-	-	-
Proportional Claim	-	-	-
IBNR Claim	-	-	-
TOTAL CLAIM	-	-	-

DETAILED TABLE
NON-PROPORTIONAL CLAIMS
1 Currency	AUD
2	3	4	5	6	7	8	9	10	11	13	15	16	17	18	19	20	22	23	24
Scheme Company contract reference	Reinsurance Contract name	Underwriting year	Priority	Limit	Index date	Participation %	Claim name	Date of Loss	Scheme Creditor claim reference number	Broker claim reference number	Scheme Company claim reference number	Ground up loss paid	Ground up loss outstanding	Reinsurance Contract incurred	Amount due to Scheme Creditor	Amount paid to Scheme Creditor	Amount outstanding to Scheme Creditor	Reinstatement or burning cost premium due	Unsettled amounts due to Scheme Company
(A) Total Claim		-
(B) Totals owing to Scheme Company			-	-

DETAILED TABLE
PROPORTIONAL CLAIMS
1 Currency	AUD
2	3	4	8	12	14	19	21	22	24
Scheme Company contract reference	Reinsurance Contract name	Underwriting year	Participation %	Scheme Creditor Reinsurance Contract reference number	Broker Reinsurance Contract reference number	Amount due to Scheme Creditor	Scheme Company Treaty Account outstanding claims	Amount outstanding to Scheme Creditor	Unsettled amounts due to Scheme Company
(A) Total Claim	-
(B) Total owing to Scheme Company		-

DETAILED TABLE
IBNR CLAIMS
1 Currency	AUD
2	4	8	12	14	25	26
Scheme Company contract reference	Underwriting year	Participation %	Scheme Creditor Reinsurance Contract reference number	Broker Reinsurance Contract reference number	Latent	IBNR claim
(A) Total Claim	-