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Title Slide
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Captive Insurance Exit & Run-Off Solutions
Speakers:
• Tom Booth, CFO, Randall & Quilter Investment Holdings plc
• Sean Logan, Chairman, Principal, ACG Limited
• Jeremy Brasier, EVP, RFIB Group Limited
Moderator:
• Nick Frost, President, R&Q Quest Management Services

Contents
• Potential drivers for sale of Captive
• Captive restructuring solutions
• Captive exit solutions
• Pricing and process
• Recent deals
• Contact details

Potential drivers for sale of Captive
• Ownership of multiple captives following M&A activity
– Different jurisdictions
– Different fronting and collateral arrangements
• Captive owner in liquidation or some other form of restructuring / corporate activity at the Parent level
• Captive no longer utilised
– annual costs resulting in declining NAV
– Soft external insurance market offers better economics than retaining risk
– Investment returns are much reduced
– Company strategy and risk appetite changes
• Long tail exposures create ongoing uncertainty
– Unutilised aggregate limits remain available for further losses to be advised
• Desire to free up the significant assets (cash) tied up in the captive especially in collateral obligations to front
companies
– Inability to close captive due to past liability underwriting
– Front Company unwilling to offer deductible buy-back or commutation of liabilities or at an acceptable price
• Change of Front Company
– Increased collateral requirements
– Lack of incentive for previous front(s) to reduce collateral requirements
– More tax efficient against dividend/capital reduction or commutation/wind-up routes
• Changes to tax, accounting or regulatory environment

Captive restructuring solutions
Solutions to remove risks & free up excess collateral
The on-going use of a Captive may still be desirable but novation of certain
prior year policies may have substantial benefits to the owner including:
• Removing/reducing exposures to long tail liabilities and/or undesirable perils or from former
subsidiaries/recently acquired companies as well as those from a certain period
• Releasing significant collateral obligation to front companies, often substantially above estimated
reserves, for re-investment; in the captive or elsewhere
• Removing involvement with one or more legacy front companies
• Streamlining the captive’s business ahead of restructuring or wind-up

Captive exit solutions
• Captive/Cell Acquisition
– All liabilities/obligations and assets
of the captive/cell are assumed
– New owner maintains the
relationship as reinsurer of the
Fronting Company (if applicable)
• Including meeting collateral obligations
– New owner also assumes all
record keeping and claims
management
• Original TPA arrangement generally
continues with oversight
– Regulatory approval obtained
• Generally received promptly and prior to
completion
• Novation/Portfolio Transfer
– Identified risks transferred to a
third party owned cell or existing
captive/insurance company
– Transferee entity replaces the
original captive as reinsurer of the
Fronting Company
– Transfer effected by means of a
Novation agreement between the
parties
• Assignment/replacement of the same
collateral obligations
– All record keeping and claims
management assumed
• Original arrangements generally
continue with oversight
– Regulatory approval obtained
promptly and generally prior to
completion

Pricing and process
• Acquisitions
– Captives typically acquired at a
discount to NAV to achieve
required return on capital
– Once future standalone run-off
costs are factored in, true discount
to NAV is often significantly
reduced/eliminated
• Transaction may therefore be effectively
NAV accretive for the vendor as well as
cash positive
• Novations
– An appropriate margin is generally
charged over the reserves
assumed to account for future runoff
costs and to generate required
return. If there is potential reserve
uncertainty/inadequacy, a further
“risk” margin may be required
– Existing collateral is either:
• Replaced by new collateral from the transferee: the
provision of which will be factored into the pricing
• Acquired/assigned to new owner together with the liabilities
making the transaction akin to an acquisition i.e. priced on a
discount to NAV basis
• Provided on a continuing basis by transferor to whom it is
released back over time
Attractive offers can be made:
• Primarily by sharing internal cost efficiencies with vendors
• Because core business is the run-off of long-tail liabilities and reserve adequacy can be fairly
assessed
• Because wider relationships with fronting insurers may alleviate future collateral requirements

Pricing and process (cont’d)
1. Indicative offer based on:
Latest audited financial statements and management accounts
Summary of business written including loss limits, aggregates and coverage periods
Latest actuarial report and claims triangles (if available)
Full claims listing including those closed, opened and reopened
Details or front company involvements and collateral obligations
2. If offer accepted, a Heads of Terms will be executed outlining price, assumptions
and any other terms along with an exclusivity period
3. Due diligence and drafting of legal documents undertaken
4. Final terms agreed and any required regulatory approvals sought and documents executed
Process can take as little as 4-6 weeks from initial information request to completion

Recent deals
Acquisi7on of Barbados based cap7ve
Acquisi7on of Guernsey
based cap7ve
Acquisi7on of Guernsey based cap7ve
Acquisi7on of Guernsey based cap7ve
RAB Insurance Company Limited
Acquisi7on of Isle of Man based cap7ve
Acquisi7on of Guernsey based cap7ve

Contact details
Tom Booth
Group CFO
+1 441 295 2185
tom.booth@rqih.com
Paul Corver
Investment Director
+44 (0)20 7780 5944
paul.corver@rqih.com
Maralyn Fichte
Insurance Investments
+44 (0)20 7977 0493
maralyn.fichte@rqih.com