Renaissance. Members Asset Protection Insurance

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1 Renaissance Members Asset Protection Insurance

2 Renaissance - Members Asset Protection Insurance Introducing a new way of protecting Limited Liability Partnerships - Renaissance Renaissance is the first asset protection policy to provide LLP members with flexible, low cost protection against insolvency. It has been designed to act both as a negotiating tool to make additional funds available to settle a claim and as a safety net to protect members financially in the event of business failure. Developed specifically for LLPs, Renaissance offers practice managers a valuable tool to protect their business against a catastrophic claim.

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4 Renaissance - Members Asset Protection Insurance Why buying professional indemnity insurance may not be the only answer If your firm is unsure whether it has purchased sufficient professional indemnity cover or considers that the purchase of additional professional indemnity cover may be seen as a deep pocket for claimants to pursue, Renaissance provides a solution that complements your professional indemnity programme and gives the members of the LLP personal protection. Where a claim threatens the future of the LLP, the members can call on funds to top up a settlement offer backed by the full professional indemnity programme. But if the claimants refuse to settle for that sum and the LLP becomes insolvent as a result, then a distribution up to the policy limit goes to the members personally. In essence the policy gives members maximum room for manoeuvre when faced with a catastrophic professional negligence claim.

5 How does the policy work? Insolvency Prevention The first level of cover triggers if a claim against the LLP exceeds its total limit of professional indemnity insurance and the firm is threatened with insolvency. The total value of the Renaissance policy can be used by members to settle the professional negligence claim, but only on the condition that the claimant waives any further claims or rights of action against the firm. The first layer of cover is therefore a valuable negotiating tool to use in setting a major professional negligence claim. Insolvency Protection The second level of cover becomes available if a claimant refuses to settle within the additional funds available under Renaissance and the LLP becomes insolvent. The policy then pays out up to the limit of indemnity to the members of the LLP for them to use as they see fit. This may include recreating the insolvent firm, starting a completely new business, setting up as a sole practitioner or even funding retirement. The payment is also available to the negligent member(s) who caused the catastrophic negligence claim, as part of their protection against a claim made personally against the member(s) by the claimant.

6 Renaissance - Members Asset Protection Insurance Renaissance - available to all sizes of LLPs Renaissance can be purchased by any size of LLP, but to qualify for it the firm must purchase a minimum limit of indemnity under their professional indemnity programme of 5 million. Renaissance can be purchased at any time during the year or its purchase can be tied in with the renewal of the primary or excess layer professional indemnity programme. Renaissance - cost of purchasing cover Renaissance has been rated to provide low cost protection to enable the members to purchase sufficient cover for their needs. ACE European Markets have calculated the premiums so that the cost is not much greater than the cost of traditional excess layer professional indemnity insurance. But of course Renaissance provides so much more for the personal benefit of the members. To obtain a quotation, we will need you to complete a simple questionnaire which will be submitted to insurers together with a copy of the last completed professional indemnity proposal form.

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8 Renaissance - Members Asset Protection Insurance Case Study An LLP purchases a total of indemnity of 30 million under their professional indemnity programme. In addition the members of the LLP purchase a Renaissance policy for 5 million. The LLP is exposed to a professional negligence claim valued at 50 million and the claimant is aware that the firm only carries professional indemnity cover of 30 million. A full and final settlement offer of 35 million is made to the claimant ( 5 million from Renaissance and 30 million from the professional indemnity programme) subject to the claimant waiving any rights to further actions against the LLP or its members. Should the claimant refuse this offer and decide to make the LLP insolvent and/or pursue individual negligent members in a personal capacity, then the Insolvency Prevention section of the policy pays nothing. Subsequently, the Insolvency Protection section of the policy is triggered, assuming of course that the total limit under the professional indemnity programme has been paid out (including payment of the self-insured excess) and the LLP is insolvent. Instead of paying monies to settle the professional negligence claim, the Renaissance policy, makes a payment for distribution to the members of the insolvent LLP, up to the total limit of indemnity. These monies can be used as they see fit, e.g. create a new solicitors practice either collectively or individually or something else completely different. Note: the limit of indemnity for Renaissance is in the aggregate.

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10 Renaissance - Members Asset Protection Insurance Renaissance - Insolvency Prevention and Protection Renaissance gives the LLP an invaluable negotiating tool to prevent a catastrophic claim from making the firm insolvent. It also benefits the individual liable member(s) in any compromise settlement, in that any rights the claimant may have against the member(s) personally are also waived should a deal be agreed within the available funds under Renaissance.

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12 Renaissance - Members Asset Protection Insurance Your Questions Answered Q: How does the policy work? A: The policy works in one of two ways: In the first instance it acts as a form of Insolvency Prevention. By way of example, if claimant A pursues B LLP for a claim that would not only exhaust the firm s professional indemnity limit, but also cause it to become insolvent because the assets in the LLP would need to be realised to meet the claim, the policy will make payment to claimant A provided that he settles within the limits of the policy, and provided that he gives up any further pursuit of compensation. In the second instance it acts as a form of Insolvency Protection. Using the example above, were claimant A to refuse settlement within the policy limits of the insolvency prevention cover, then the policy would make no distribution for use in a settlement with such claimant at all. The policy would, however, make a distribution to members of the LLP for them to do with as they please. Q: How is insolvency established? A: Insolvency is established where the LLP obtains a certificate signed by auditors, stating that in accordance with the Insolvency Act 1986 the LLP will be unable to meet its debts as they fall due. Q: What is the position if a claim exhausts the limit of indemnity under the LLP s professional indemnity insurance programme but does not render it insolvent? A: An excess is payable (usually between 10% - 20% of the limit of indemnity purchased under Renaissance) when a claim exhausts the total limit of indemnity under the professional indemnity programme but does not make the LLP insolvent because there are still sufficient assets held within the LLP.

13 11 12 Q: Can Renaissance be purchased in place of the top layer of the professional indemnity programme? A: Yes, provided that the total limit held by the LLP is at least 5 million. Having said this, we would recommend that Renaissance is purchased to sit on top of your current total professional indemnity programme. The excess layer professional indemnity policy will typically provide an any one claim limit whereas Renaissance is an aggregate limit. Q: Will all claims against the LLP be covered? A: Yes. Catastrophic claims made against the LLP will be covered provided the claim has been or will be paid by the insurers of the professional indemnity programme. Any catastrophic claims relating to work carried out by the firm pre conversion to LLP status are excluded but they can also be insured subject to payment of additional premium. Q: Does Renaissance provide protection for a personally liable negligent member? A: Yes. Renaissance does provide protection for a personally liable negligent member. However the amount they can receive is limited, depending on their interest in the insolvent LLP. Thus payment under Renaissance to the negligent member will only go part of the way to off-set their liabilities. Q: Can other members in the insolvent LLP help to protect the personally liable member? A: Yes. Once insurers have settled their obligations under Renaissance, the members are free to use their portion of the money as they see fit.

14 Renaissance - Members Asset Protection Insurance Q: Can we tell third parties that we have a Renaissance policy? A: No. The existence of a Renaissance policy must not be disclosed to any third party without permission of ACE European Markets. Details of Renaissance cannot be disclosed in any tender process. Only the limits under the main professional indemnity programme can be revealed. Q: If the LLP is insolvent and subsequently wound up, can the members continue as principals in private legal practice? A: Yes. Provided that the individual members will NOT themselves be bankrupted (their capital contribution in the LLP being limited to their investment in the woundup LLP), they can, if they wish, set up as another LLP/partnership, limited company etc with or without the distribution paid to them as a result of the LLP s insolvency. However, if the members are held liable for wrongful trading due to practising whilst insolvent then restrictions on the solicitors ability to practise would apply. Q: Is Renaissance exclusive to Professions? A: Yes. Renaissance can only be arranged through Professions.

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16 Renaissance - Members Asset Protection Insurance about lockton Lockton is the largest independent, privately owned, global insurance broker and employs more than 4,950 people. Lockton delivers services throughout the world to businesses of all sizes, as well as individual clients. It was founded by Jack Lockton in Kansas City, Missouri, USA, in 1966 and from a modest, home-based insurance agency, has become one of the largest insurance brokers in the world. Professions is a division of Lockton Companies International Limited. Professions is one of the UK s largest professional indemnity (PI) insurance brokers and is a long established Lloyd s insurance broker providing risk management advice and arranging PI insurance cover for clients. Specialist teams handle professional indemnity for solicitors, insurance brokers and construction professionals through to medical malpractice. We aim to provide competitive premiums, extensive cover and innovative solutions to PI planning. Our specialist knowledge and access to a range of markets means we are able to offer a broad choice of products and advice on key professional indemnity issues, including: Primary professional indemnity insurance Excess layer insurance Deductible or Infill insurance. In addition to these areas we can offer advice and guidance on the following: Risk management After the event insurance General commercial combined Financial services Captive arrangements Alternative risk financing.

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18 Renaissance - Members Asset Protection Insurance About ACE ACE Limited is the Bermuda-based holding company of the ACE Group of Companies, one of the world s leading providers of insurance and reinsurance. Established in 1985 by a consortium of 34 Fortune 500 companies to provide hard-to-find excess liability coverage, ACE was described by Institutional Investor magazine as the biggest event in the insurance business since the Great Chicago Fire. Twenty years later, the ACE Group of Companies is one of a very few truly global commercial property and casualty insurance companies, with offices in more than 50 countries and jurisdictions, and correspondents in some 90 more. Trading on the New York Stock Exchange under the ticker symbol ACE, the company is covered by most of Wall Street s major securities houses. With assets of $49 billion, ACE is a component of the S&P 500 stock index. While ACE is only 20 years old, the company is not without a rich heritage. As a result of their acquisition of CIGNA s global property and casualty operations in 1999, ACE traces its history back to 1792, when the Insurance Company of North America (INA) issued its first coverage on a shipment from the United States to Ireland.

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20 Renaissance - Members Asset Protection Insurance Notes

21 contact For further details on Renaissance please contact: Steve Holland on +44 (0)

22 Our Mission To be the worldwide value and service leader in insurance brokerage and risk management Our Goal To be the best place to do business and to work Lockton Companies LLP. Authorised and regulated by the Financial Conduct Authority. A Lloyd s broker Registered in England & Wales at The St Botolph Building, 138 Houndsditch, London, EC3A 7AG. Company No. OC