Alternative Asset Opps PCC Ltd Potential increase in the Cost of Insurance (9766X)
May 11 2016 - 10:56AM
UK Regulatory
TIDMTLI
RNS Number : 9766X
Alternative Asset Opps PCC Ltd
11 May 2016
Alternative Asset Opportunities PCC Limited (the "Company")
11 May 2016
Potential increase in the 'Cost of Insurance' (COI)
The interim report for the six months to December 2015 referred
in some detail to insurers applying increases to applicable premium
rates. These are known as 'cost of insurance' (COI) increases. COI
increases have historically been very rare and, although they can
be implemented each year by the insurer, until September 2015 the
Company had not experienced any such increases since its launch in
2004. To date, only three of the Company's 26 insurers have applied
COI increases, on seven out of the 75 policies in the portfolio
with a face value of $6m, with an average increase of 10% (as
referred to in the interim report).
A small number of insurers have recently applied aggressive COI
increases to premium rates for some classes of policy. So far, we
have received only one confirmed notice of such an aggressive
increase from Banner Life Insurance Company, but we have now been
advised by our Investment Manager that on a further six policies
issued by Transamerica Life Insurance Company (with a face value of
$9.9m out of a total portfolio face value of $118m) substantial
increases may be made which, if implemented, would raise the future
premiums payable on these policies by 97% on average. Such
increases would take effect between June and October 2016 resulting
in additional premiums of approximately USD$800,000 in the year to
30 June 2017. The impact on the valuation of these six policies
would be a reduction of 51%, which would have a negative impact on
the Company's net asset value of around 5%.
Clearly your Board is extremely concerned by this possible
development. If other insurers decide to implement increases of the
order of magnitude indicated by Transamerica, this could have a
significant adverse effect on the Company's net asset value.
It would appear that insurers are not required to provide a
detailed explanation to policy holders to justify COI increases and
therefore it is not clear why premiums should be increased. The
aggressive increase in premiums by certain insurers has resulted in
a number of class actions in the USA against them, two of the
recipients being the two insurance companies named above. In
conjunction with our advisers we are monitoring developments
carefully and will update shareholders in due course.
Enquiries:
Alastair Moreton
Stockdale Securities Tel: 020 7601 6118
Charles Tracy
Chairman Tel: 020 3246 7405
This information is provided by RNS
The company news service from the London Stock Exchange
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