The Federal Court has agreed that a regulatory move to wind up Eric Insurance should be discontinued after creditors approved an alternative pathway.

The court last month adjourned the Australian Prudential Regulation Authority’s wind-up application to allow time for creditors to vote on a deed of arrangement.

Creditors backed the deed, which took effect from September 19, and the court on Friday approved discontinuation of the APRA application.

Eric, which sold add-on motor insurance products through vehicle dealers, stopped underwriting new policies and entered a voluntary solvent run-off from October 2023.

Voluntary administrators Kathy Sozou and Shaun Fraser from McGrathNicol were appointed on July 28 after a surge in complaint handling costs.

Gilbert + Tobin’s restructuring team, which has advised the administrators, says the deed is estimated to deliver a materially better return to policyholders and creditors than a liquidation.