Zurich Insurance Group has signed an agreement to sell its pre-2007 UK legacy employers’ liability policies portfolio to Bermuda-based Catalina Holdings.

At the end of 31 December 2017, the portfolio had gross liabilities of $2bn mainly industrial disease related claims, including asbestos.

Zurich group CFO George Quinn said: “The sale of this portfolio reflects Zurich’s strategy to eliminate or reduce exposure to legacy lines of business.

“This focus on actively managing capital allocation to improve overall returns will continue in 2019.”

The transaction has been structured in a two-step process.

In the first step, Zurich Insurance will ink a reinsurance agreement with Bermudan reinsurer Catalina General Insurance. In the second step, policies and liabilities will be transferred to Catalina London.

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Subject to regulatory and court approvals, the transfer is likely to conclude within two years.

Zurich said that the company may sustain a small loss due to upfront expenses related to the transaction that will be recognised in business operating profit in the fourth quarter of 2018.

However, Zurich expects to achieve an overall positive contribution to the business operating profit over the full period to completion of the transfer of the policies.