Scheme of arrangement

A scheme of arrangement is a British law procedure by which a company proposes a collective settlement to its creditors, sanctioned by the court and binding on all once a qualified majority consents. Applied to reinsurance, it allows an entire run-off portfolio to be settled at once, including claims not yet reported, by valuing each claim and making a final payment. Its distinctive feature is that it also applies to a solvent company, which makes it an exit tool rather than an insolvency one. The problem it solves is the blocking minority: commutation requires each cedant's individual agreement, and a handful of refusals can keep a portfolio open for twenty years. A scheme carries the majority's decision. The criticisms concern the position of the minority, forced to accept a valuation it disputes, and the estimation of future claims, an inherently uncertain exercise on lines where notifications spread over decades.

A run-off reinsurance portfolio carrying 1,850 cedant claims is settled in 2026 by a scheme sanctioned after approval by 78 percent of creditors by number and 91 percent by value. Future claims are valued at 67 percent of their estimated nominal amount. Four dissenting cedants, representing 2.3 percent of claims, are bound by the sanction and lose all later recourse.

Scheme of arrangement, Solvent scheme, Plan d'apurement, Scheme