Cavello Bay Reinsurance, a subsidiary of Enstar, has filed a lawsuit against Aspen Insurance Holdings Ltd. and several of its affiliates, alleging breach of a 2022 reinsurance agreement.
The complaint, submitted to Connecticut Superior Court, asserts that Aspen’s actions have resulted in damages exceeding US$400 million. Cavello Bay claims that interest on the amount owed surpasses $50,000 per day.
The defendants named in the suit include Aspen Insurance UK Ltd., Aspen Managing Agency Ltd., Aspen Bermuda Ltd., Aspen American Insurance Co., and Aspen Specialty Insurance Co., in addition to the parent company.
Cavello Bay, based in Bermuda, alleges that it entered into an agreement on Jan. 10, 2022, to reinsure Aspen for claims and risks related to certain insurance and reinsurance contracts issued or assumed by Aspen for losses occurring on or before Dec. 31, 2019.
Losses occurring from Jan. 1, 2020, onward are excluded from the agreement. According to the filing, Cavello Bay agreed to reimburse Aspen for covered losses, with payments to be reduced by premiums collected on or after Oct. 1, 2021, the effective date of the contract.
The lawsuit alleges that Aspen has not identified or credited these premiums to Cavello Bay as required by the agreement.
Cavello Bay contends that the failure to credit these premiums has resulted in economic harm. The company states that the reinsurance premium paid at closing was lower than it would have been if the premiums had been properly credited.
Additionally, Cavello Bay claims it has overpaid ultimate net losses due to not receiving the collected premiums.
The filing notes that Cavello Bay has sought to resolve the dispute with Aspen for more than a year. “Cavello Bay has attempted in good faith to resolve these issues with Aspen for well over a year to no avail,” the suit states. The reinsurer referenced correspondence in March and May, indicating efforts to reach a business resolution had stalled.
Enstar Group, Cavello Bay’s parent company, has completed more than 120 acquisitions of companies and portfolios since its inception. The group operates globally, including in Bermuda, the United States, the United Kingdom, Europe, and Australia.
In May, Cavello Bay also completed a US$2.3 billion loss-portfolio transfer with AXIS Capital, covering 75% of reserves associated with certain pre-2022 US casualty insurance liabilities.
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