The Excess & Casualty Reinsurance Association Pool (“ECRA Pool”) is one of the largest legacy reinsurance pools spanning decades and involves many insurers and reinsurers in the runoff market. With the demise of R&Q, the ECRA Pool was brought to an abrupt halt in September 2024. Rick Dupree (The Travelers Companies), Judy Harnadek (Resolute Management, Inc.), Andrew Rothseid (Gallagher Re) and Steve Falk (Resolute Management, Inc.) provided a look into the history of the Pool, actions taken by certain Pool members leading up to the shutdown of the Pool and a glimpse at what is next. A video replay of this presentation is available on the AIRROC On Demand platform.
Some of the key take-aways from the presentation include the following:
- “The sum is greater than the parts” – The ECRA Pool is made up of more than 100 reinsurers/pool members (all but two are U.S. based reinsurers) that provided reinsurance from 1950 to 1983. The Pool was managed by ETMC (through St. Paul, Guy Carpenter and R&Q) until the liquidation of R&Q Holdings Ltd. in 2024. The vast majority of the ECRA Pool members are also significant cedents into the Pool; there are only 15 pure cedents into the Pool. As of September 2024, there were approximately 4,200 open claims and 1,400 precautionary claims. Past paids by the Pool total more than $3.4B.
- “Big players come together for the market” – Following the news and recognizing that R&Q was in distress, some of the larger pool members, Travelers, AIG, Resolute managed companies (e.g., CNA and Liberty) and Century Indemnity, joined forces in 2023 to begin thinking about how to respond to the potential shut-down of ETMC. Individuals from each of the companies began meeting first on a monthly basis and then more regularly to develop a plan. Planning involved: (a) identifying the pool members and representatives of those reinsurers; (b) reviewing and analyzing the participation/share of responsibility each pool member had in the pool; (c) researching and identifying parent companies that may now be responsible for pool member shares; (d) contacting and keeping other pool members apprised of developments; (e) developing a steering committee model for the pool to continue to be managed appropriately; (f) negotiating with R&Q and ETMC for a way forward; (g) identifying and discussing the potential for broker participation; and (h) identifying, interviewing and selecting a new pool manager. Hopefully, by the time of this publication, a new pool manager will be in place and the pool will be operational again.
- “Different perspectives can lead to good results” – In connection with developing a plan, the steering committee took into account various perspectives, including those of pool members, cedents, brokers and insolvent companies. Considering all of these interests the steering committee was able to develop and come up with a recommended cost share for the future management of the pool (which previously had been at no charge) to spread the costs across the interested parties that was most fair and equitable.
- “There is still the potential for change” – Once the pool is up and operational again, there is still the potential for restructuring. In addition to the historical LTE asbestos and traditional environmental risks, there are continuing emerging risks that impact the pool liabilities, including molestation, PFAS and climate change. Given this, some pool participants may be looking to get out though commutations or other potential restructuring, including an LPT to leverage enhanced administration with costs.
Thus, as can be seen, there has been a significant undertaking by certain companies to keep the pool afloat and operational. This is a prime example of how the insurance industry (even though different interest may be at play and even though those companies may be involved in disputes over other matters) can come together when it matters most and think strategically for the interests of all impacted.
