Apart from establishing personal contact, the first meeting should provide general information about the portfolio, such as volume, compilation, lines of business, ages etc. If interest is expressed, an initial time plan may be discussed.

These talks are always conducted on our side by experienced members of the Executive Board. We understand negotiations as a dialogue between DARAG and an insurance underwriter seeking to transfer Run-off. Short decision making processes and the close supervision of every transaction by a member of DARAG’s Executive Board guarantee maximum attention, as well as quick and substantiated decisions. The decisive advantage for the transferring insurer: resources tied up in Run-off quickly become available for other projects.

Even if it actually goes without saying: we consider confidential treatment of all information to be a top priority. To successfully conclude any transaction, access to confidential business records is essential. We respect the trust placed in us and comply with strict confidentiality from the outset. This is documented in a non-disclosure agreement that is signed by the parties concerned. Both parties agree to treat all information they obtain confidentially. Where we consider drawing on the services of external consultants, we exclusively use renowned providers who comply with maximum professional and legal confidentiality requirements. We are happy to provide a draft non-disclosure agreement.

During this step, initial documents are made available by the transferring insurer, analysed by us and documented in an indicative bid.

The indicative bid is intended to provide the transferring insurer with an initial indication of the possible terms and sensitive points of a transaction. If an agreement appears too ambitious, the process can be reviewed before outlay and costs are incurred. Usually, it is assumed premises that lead to different ways of seeing things and which we recognise together with the transferring company in this early phase. These are then systematically eliminated in the following process steps.

We underlie supervision by the Federal Financial Supervisory Authority (BaFin). Transactions are examined and approved by BaFin and/or the supervisory authority responsible for the transferring insurer. The supervisory authority is called in to protect the interests of the insurance holders. This is something we at DARAG deem very important. Our business model is based on respectful relations with the insurance holders whose claims are entrusted to us. We are therefore especially concerned to inform BaFin early on in the negotiations. What’s more, this also allows any issues arising from the approval process to be addressed in the early stages, both saving valuable time and creating security.

The indicative bid is followed by a due diligence phase. During this phase, the vendor provides all information pertaining to the portfolio or entity to be sold (loss triangles, information relating to the capital investments used for backing, reinsurance, examination of individual claims, etc.). This information allows us to perform an in-depth analysis and valuation prior to submitting a final bid. Depending on the scope and quality of the information to be analysed, this process step can take anything up to one month. In most cases we deploy a small team “in situ” for a few days in order to inspect particularly sensitive documents. We are happy to provide a questionnaire to assist with compiling the various documents.

The final bid reflects the results of the due diligence process. In concrete terms, this above all includes offsetting all cash flows expected in the run-off phase against technical provisions. This process anticipates all necessary valuation adjustments. Differences are presented and settled in the form of a compensation payment. The margin we have calculated as compensation for the “final” assumption of all foreseeable and future risks is shown separately. This allows all stakeholders to understand how our bid is calculated.

After submission of a final bid, this phase deals with the details of the portfolio transfer agreement or, in the event of a corporate takeover, the contents of the purchase agreement. We are of course happy to accept a standard “optimisation” of mutual interests among merchants. The negotiation concludes with the signing of the agreement.

Concurrently: internal approval process by DARAG
In order to shorten the negotiation phase, the internal approval processes by DARAG (insofar as necessary) take place parallel to the negotiations, so that they do not delay the transaction. The relevant discussions are always conducted by a member of our Executive Board. This ensures decisions can be taken directly and guarantees the necessary regard is given to the respective transaction.

The negotiation phase is concluded by the signing of an agreement which is presented by the corresponding bodies of the transferring insurer and the supervisory authority. Provided all authorisations are granted and the agreed parameters for conclusion of the agreement are met, the portfolio transfer or acquisition agreement becomes legally effective.
During this approx. 3-month phase, preparations for data migration can be made. The handling of business transactions during this time is determined in advance. Closing signifies operational transfer and migration of the data.

All insurance holders or claimants whose ongoing claims have been transferred to us are informed about the transfer without delay. The communication is drafted and agreed beforehand with the transferring insurer. All correspondence is subsequently handled directly by us.