8-KMaterial Agreements

Chubb Ltd 8-K Report, Material Agreement (Jan 31, 2006)

Filed January 31, 2006For Securities:CB

Summary

Chubb Ltd. (formerly Ace Limited) filed an 8-K on January 31, 2006, to report an amendment to a material definitive agreement concerning the sale of certain reinsurance subsidiaries. The amendment to the January 5, 2005 Stock Purchase Agreement modifies the terms for the sale of ACE American Reinsurance Company (AARe), Brandywine Reinsurance Company (UK) Ltd. (BRUK), and Brandywine Reinsurance Company S.A.N.V. (SANV) to Randall & Quilter Investment Holdings Limited (R&Q). The key changes revolve around the release of Chubb's obligations related to the BRUK Guarantee to the Institute of London Underwriters (ILU). The amendment introduces a $750,000 escrow deposit requirement if R&Q does not secure a definitive response from ILU by the closing date. Additionally, the amendment outlines a reinsurance agreement for AARe's liabilities and mandates R&Q to issue a $5 million promissory note to AARe. These adjustments appear to facilitate the closing of the transaction by addressing contingent liabilities and financial arrangements.

Key Highlights

  • 1Amendment to a Stock Purchase Agreement dated January 5, 2005, for the sale of reinsurance subsidiaries AARe, BRUK, and SANV to Randall & Quilter Investment Holdings Limited (R&Q).
  • 2New provision requires R&Q to deposit $750,000 into an escrow account if the Institute of London Underwriters (ILU) has not provided a definitive response regarding the release of ACE's BRUK Guarantee by the closing date.
  • 3R&Q will be required to either secure the release from the BRUK Guarantee or assume ACE's obligations and indemnify ACE.
  • 4An amendment mandates a reinsurance agreement for AARe's net losses in excess of reserves, with a limit of liability of $35 million, to be provided by an 'A' rated reinsurer.
  • 5R&Q is required to issue a $5 million promissory note to AARe as part of the amended agreement.
  • 6ACE subsidiaries and R&Q submitted amended applications to the Pennsylvania Department of Insurance detailing the reinsurance arrangement for AARe and the commutation of claims for SANV and BRUK.
  • 7ACE withdraws its request for repayment of a $100 million surplus note issued by Century Indemnity Company in January 2005.

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