Scheme of arrangement

A scheme of arrangement is a procedure under British law. A company proposes a collective settlement to its creditors; the court sanctions it, and it binds everyone once a qualified majority consents. In reinsurance, it settles an entire run-off portfolio at once, claims not yet reported included: each claim is valued and paid in a single final payment. It also applies to a solvent company, which makes it an exit tool rather than an insolvency one. It solves the blocking minority problem. 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. Critics point to the position of the minority, forced to accept a valuation it disputes, and to the estimation of future claims, inherently uncertain on lines where notifications spread over decades.