The Federal Court has adjourned an application to wind up Eric Insurance to allow creditors time to consider an alternative pathway.

The Australian Prudential Regulation Authority filed the application a month ago, but on Friday Justice Ian Jackman agreed to its adjournment request, with a new hearing date set for September 25.

A creditors’ meeting later this month will vote on an administrators’ proposal for a deed of company arrangement, which would include plans for managing policyholder claims, as an alternative to Eric entering liquidation.  

Eric, a small general insurer that provided add-on motor vehicle-related products, decided to exit the market in July 2023 and ceased writing new policies in June last year.

The company previously said it was well positioned to continue to manage the run-off, but Kathy Sozou and Shaun Fraser from McGrathNicol were appointed voluntary administrators on July 28 this year.

Justice Jackman said the administrators have engaged with APRA, the Australian Financial Complaints Authority and the Australian Securities and Investments Commission regarding the deed and the administration of Eric generally.

“To protect the interests of policyholders, APRA has maintained heightened supervision of Eric for some time and explored various exit options with the insurer and the administrators,” an APRA spokesperson told insuranceNEWS.com.au after the hearing. “APRA is closely monitoring Eric’s withdrawal from the insurance industry to achieve the most favourable outcome for policyholders.”

An ASIC report on company activities and property, dated August 4, shows Eric had assets of $7.58 million and was owed $1.96 million.

The report shows Eric owed employees $919,042 and creditors $724,261. The creditors included $45,779 for AFCA, which has handled complaints – some upheld and some rejected – against companies selling add-on and consumer credit insurance, often dating back years.  

Eric provided comprehensive motor cover and products such as warranty, tyre and wheel, and guaranteed asset protection policies taken out when a vehicle is bought with financing.

The business was rebranded as Eric in July 2016 by Avea Insurance, which acquired IAG-owned Swann Insurance’s distribution rights for franchise motor dealers.

An August 14 administrator’s notice to policyholders said unless an insured cancelled a policy, it remained valid and would be managed in accordance with its terms pending an assessment to determine the best course of action for policyholders and creditors.

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