Johannesburg - African Bank, which crumbled under a mountain of debt in August 2014 and is now under curatorship, has announced that Guardrisk Life Limited has been appointed to underwrite insurance products for African Bank and Good Bank.
The bank says this follows the lapsing of its relationship with The Standard General Insurance Company at midnight on Saturday.
African Bank’s curator, Tom Winterboer, says in a statement that African Insurance Group (InsureCo), the company which will hold all insurance interests as part of the Good Bank Group under the Good Bank Restructuring Proposal, has concluded an agreement with Guardrisk Life.
InsureCo is a fellow subsidiary of Good Bank, both of which are held 100 percent by African Bank Holdings (New HoldCo).
The Guardrisk cell captive commenced providing credit life and other insurance underwriting arrangements for African Bank’s new business with effect from January 17 and will do so for Good Bank’s new business with effect from the targeted Transaction Effective Date of April 4.
African Bank crumbled under a mountain of bad debt in August 2014, which forced the government to appoint external administrators to oversee a restructuring that included carving out a “good bank” using its healthy loan book – worth R26 billion.
Its parent, African Bank Investments Limited, which also owns an insurance business and failed furniture retailer Ellerines, also went into business rescue and protection from creditors.
African Bank lost R9.3 billion in the year to September 2014 compared with a loss of R6 billion a year earlier.
It has now concluded a funding arrangement to provide InsureCo with capital so it can operate. This funding arrangement will transfer to Good Bank in April.
The deal allows InsureCo to insure the new African Bank and Good Bank customer risk exposures through an equity participation in Guardrisk known as a "cell". These arrangements typically allow participants to enjoy all the benefits of owning its own insurance company without the inherent cost and administrative implications of doing so.
Brian Riley, CEO designate of Good Bank, said: “We are extremely pleased with this significant development which provides further impetus to the anticipated finalisation of the restructuring of African Bank in less than three months’ time. The new arrangement with Guardrisk, a leading cell captive insurer, represents a big step forward, and is mutually beneficial for both African Bank and its customers.”
IOL