The entity that Trenwick acquired by merger was Chartwell Re Corporation. Like
Trenwick, Chartwell Re was an NYSE-listed company. The total cost of the acquisition
to Trenwick was estimated at $368 million, which included the cost of the eight million
new Trenwick shares issued to the former Chartwell Re holders as the merger
consideration, the assumption of Chartwell Re’s debt, and the costs to Chartwell of
purchasing $100 million in reserve protection.
The latter issue is raised by the Litigation Trust prominently in the complaint.
What it involved was a requirement, demanded by Trenwick, that Chartwell purchase
$100 million in reinsurance to protect Trenwick against unanticipated increases in the
reserves of Chartwell attributable to business Chartwell wrote before the merger.
According to the complaint, the $100 million was exhausted quickly after the merger, as
Chartwell’s claims exceeded even that excess coverage.8
By merging with Chartwell Re, Trenwick acquired several new U.S. and
K. insurance businesses. The Chartwell insurance businesses were all rated by
M. Best Company for claims-paying ability at an excellent level and by
Standard & Poor’s at an A- for claims-paying ability.9
In the merger proxy Trenwick issued in connection with the Chartwell merger, it
was estimated that after the merger with Chartwell, Trenwick would have assets in excess
of $3 billion and that the combined companies’ premiums for 1999 would be nearly $900
Compl. ¶ 71. Hefter Decl. Ex. B Ex. 99.2 at 3-4 (Trenwick 8-K filed June 25, 1999).