Eric Insurance - Case Update

Shaun Fraser and Kathy Sozou of McGrathNicol, the voluntary administrators of Eric Insurance, have crafted a streamlined alternative to liquidation for the general insurer, devising a novel claims resolution scheme implemented via a DOCA executed on 19 September. The scheme mirrors Financial Claims Scheme (FCS) protections while enhancing returns for policyholders and creditors, and may serve as a model for future restructurings of distressed insurers where a straight liquidation would otherwise trigger the FCS.

Eric Insurance entered voluntary administration in July 2025 after the Australian Prudential Regulation Authority (APRA) launched winding-up proceedings, citing concerns over the insurer’s ability to manage its run-off solvently and escalating complaint-handling costs. At the time of appointment, Eric had around 63,800 active policies held by 51,500 policyholders and estimated liabilities of $7.4–$9.4 million. McGrathNicol partners Kathy Sozou and Shaun Fraser were appointed administrators.

With no viable recapitalisation prospects, the administrators proposed a DOCA designed to deliver outcomes comparable to the FCS, while avoiding the costs and inefficiencies of liquidation. The scheme preserves limited coverage for policyholders—covering claimable losses occurring before or within 28 days of the DOCA’s commencement, provided claims are notified within three months—and converts other entitlements into claims for unearned premiums. Claims admitted under this process are assessed by the deed administrators and paid from a central deed fund consisting of Eric’s remaining cash and asset realisations.

The administrators emphasised that the DOCA substantively mirrors the protections available under the FCS but incorporates a streamlined claims management process expected to reduce costs and enable quicker distributions, thereby improving estimated returns to creditors relative to liquidation. Importantly, the DOCA also extinguishes all admissible debts and claims once the deed fund has been distributed.

After engagement with APRA, ASIC, and AFCA, creditors approved the DOCA unanimously. The deed is regarded as a novel precedent in managing the collapse of a general insurer, providing policyholders with a controlled run-off mechanism outside of liquidation, and balancing the need for regulatory oversight with efficiencies in administration.

The administrators’ most recent report can be found HERE. They were advised by Gilbert + Tobin’s Restructuring and Insolvency team, led by Orla McCoy, supported by special counsel Mikhail Glavac and lawyer Jing Zhang. APRA was advised by Emanuel Poulos and Lucinda Blue of Ashurst.