Chester Street Insurance Holdings Limited (Formerly Iron Trades Holdings Limited) ("Chester Street")

Chester Street was incorporated as a wholly-owned subsidiary of The Chester Street Employers Association Limited to assume all the assets and liabilities of that company under the provisions of Schedule 2C of the Insurance Companies Act 1982 with effect from 31 December 1997. In February 2000, Chester Street completed the sale of Iron Trades Insurance Company Limited to QBE International Insurance Limited.

On 19 December 2000, based on the fundamental uncertainties surrounding the financial position of the company, the Directors of Chester Street proposed a Scheme of Arrangement under section 425 of the Companies Act 1985 ("the Scheme"). The Scheme was designed primarily to provide the best solution for creditors as a whole in the event that the Directors concluded that the value of Chester Street's assets was less than the amount of its liabilities, including its contingent and prospective liabilities.

In January 2001, based on preliminary actuarial advice indicating that the value of Chester Street's assets was significantly less than the amount of its liabilities, the Directors of Chester Street petitioned the High Court for the appointment of provisional liquidators and Dan Schwarzmann and Colin Bird were appointed on 9 January 2001. Colin Bird was replaced as Joint Provisional Liquidator by Mark Batten on 27 July 2001.

On appointment, the Joint Provisional Liquidators continued to promote the Scheme as being in the best interests of creditors as a whole and it was unanimously approved by meetings of creditors on 5 February 2001. Following formal sanction of the Scheme by the High Court on 28 February 2001 it became effective on 5 March 2001. Under the Scheme, responsibility for the day-to-day management and control of the run-off of the company has passed to the Scheme Administrators.

The Policyholders Protection Board ("PPB") agreed to assist policyholders who are eligible for protection under the terms of the Policyholders Protection Act 1975 ("PPA 1975") as if Chester Street were in liquidation. The responsibilities of the PPB were transferred to the Financial Services Compensation Scheme ("FSCS") with effect from 1 December 2001 under the provisions of the Financial Services and Markets Act 2000. The FSCS continues to compensate eligible policyholders in line with PPA 1975. In the case of corporate policyholders, protection is available only in respect of compulsory classes of business. As Employers' liability insurance has only been compulsory since 1 January 1972 (29 December 1975 in Northern Ireland), concerns were expressed where an element of injury or disease was sustained before that date. Particular concern was given to the position of employees whose employer, insured by Chester Street, no longer existed and was unable to meet legal obligations to an injured employee.

PPA 1975 did not offer protection to employees who may have acquired rights to claim direct from their former employer's policy under the terms of Third Parties (Rights Against Insurers) Act 1930. To overcome this, the Association of British Insurers entered into an agreement in May 2001 with HM Treasury to meet such claims as if they had been protected by PPA 1975. This agreement operated in respect of all such claims where settlement was agreed between 9 January 2001 and 1 December 2001. The FSCS meets such claims where settlement was agreed before 9 January 2001 and after 1 December 2001.

Payments by FSCS to policyholders - Policyholders who consider that they may be eligible for FSCS protection should contact Capita Insurance Services Limited ("Capita") for an FSCS questionnaire. Following confirmation from the FSCS that a policyholder is eligible, Capita will forward details of protected payments to the FSCS and arrange payment.

Payments by FSCS and ABI to claimants with direct claims against Chester Street - Where a former employer is insolvent and the claimant's injury was sustained before 1 January 1972 (29 December 1975 in Northern Ireland) Capita will forward details of the claim to the FSCS or ABI as appropriate and arrange payment.