ILU Guarantees
When the ILU and IUA merged in December 1998, the ILU retained responsibility for the parental guarantees given by companies who had been members of the ILU. While the ILU has the power to surrender a parent company guarantee, it can so do only in exchange for a replacement instrument of at least equivalent value, although not necessarily of the same type.
It is incumbent upon the ILU to comply with certain conditions before any consideration can be given by the ILU Board to any replacement instrument. In broad terms these conditions are:
- The ILU will not bear any costs application to such consideration, including accounting, actuarial or legal costs.
- Any replacement instrument will be measured against potential liabilities.
- Any replacement instrument must be a genuine stand-alone substitute for the guarantee and not form part of a general portfolio protection.
- Any security offered as collateral will be measured as a long term proposal and not a short term source of new finance.
- Where applicable, the consent of the appropriate regulatory authority (PRA) should be sought prior to approaching the ILU.
- Where a replacement instrument is a reinsurance, the ILU must be satisfied that certain additional terms and conditions will be met.
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