News

Earlier we had informed you of actions by A. M. Best relating to the downgrading of Tower Group Companies. There have been significant developments that were announced today in a letter released by Tower chairman Michael H. Lee. The letter outlines the pending merger of Tower with ACP Re and the financial partnership with AmTrust and National General (affiliated companies with ACP Re) until the merger is final. 

In his letter, Mr. Lee states:

“Specifically, we have reached an agreement with AmTrust on Tower’s commercial lines business and National General on Tower’s personal lines business whereby, subject to receipt of necessary regulatory approval, those companies will provide 100% quota share reinsurance and a cut-through endorsement (the “Cut Through Reinsurance Agreement”) to cover all new and renewal commercial and personal lines business. In addition, AmTrust and National General have been granted a 10-day option to reinsure on a prospective basis not less than 60% of the unearned premium reserves related to our in-force commercial and personal lines business, respectively, also on a cut-through basis and subject to receipt of necessary regulatory approvals. We understand that AmTrust and National General expect to exercise the option and reinsure most of the unearned premium reserves. “

This proposed merger would appear to be a positive move as regards Tower Group Companies policy holders. But, as pointed out in the Tower press release risks that could adversely affect the proposed merger include, but are not limited to, the following: 

• Governmental approvals of the merger may not be obtained or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger;
• The Board of Directors of Tower may withdraw its recommendation and support a competing acquisition proposal; and
• Tower's shareholders may fail to approve the merger.

Tuscano is still waiting to hear more from Tower, AmTrust, and National General about their plan for the handling of business going forward. As we learn more, we will pass this information along to you.