Paul Evans, joint provisional liquidator at Price Waterhouse with Richard Boys-Stones, said the move meant some claims on policies taken out before 1970 might not be paid. He said: 'We hope payments will be in full but we can't be certain.'
The collapse came after a sharp rise in estimates of the cost of insurance claims from the US and marks the final stage in the decline and fall of the London-based insurer, which ceased writing new policies two years ago because of its financial problems.
Orion and its subsidiary, the London and Overseas Insurance Company - which also went into provisional liquidation yesterday - are wholly owned by the Dutch insurance giant ING. Mr Evans said: 'They have decided for their own reasons not to continue to support their subsidiaries.'
The two firms in provisional liquidation are members of the Institute of London Underwriters (ILU), an insurance marketplace which will cover claims from 1970 onwards under an agreement with ING, which is contributing funds to cover the shortfall.
A spokesman for ING said: 'We don't think we have any responsibility before 1970,' which was when the group acquired Orion.
He also said past provisions the group had made were enough to cover the costs of payments under the agreement with ILU and the moves yesterday would have no financial effect on the group. The group made write-downs of 423m guilders ( pounds 158m) and provisions of 604m guilders ( pounds 226m) last year, which included the costs of Orion.
Pollution and asbestos liability has been a huge problem. Many policies were taken out decades ago, and the damages have only recently come to light, so pre-1970 claims on Orion could be substantial.
The problems are similar to some that caused heavy losses at the Lloyd's reinsurance market - and there is a possibility that some of Orion's liabilities may have been reinsured into Lloyd's.
Price Waterhouse, the ILU and ING were unable to give any indication of how the dollars 1.5bn was divided between the pre- and post- 1970 periods. The amount is calculated before reinsurance but no estimate was available of the amount of reinsurance Orion had.
Tony Funnell, chief executive of the ILU, said the majority of the policyholders were abroad, mostly in the US. 'There will not be too many UK policyholders affected,' he said.
Policyholders since 1970 were protected because the ILU issued the policy on behalf of its members. They would eventually receive full payment as a result of an agreement between the ILU and the Dutch parent company.
Mr Evans said he believed Orion had deteriorated substantially since its last accounts for the year to December 1992, when the company had liabilities and provisions of dollars 348m, which was 10 times its net assets.
Mr Evans said he planned early talks with large creditors about the prospects for a scheme of arrangement for the two companies.
This would lead to the prospect of some payment to creditors earlier than would be likely in a liquidation, and so substantial savings in costs for creditors. Mr Evans expected the winding down of the company to take many years. It employs 90 people.
Coopers & Lybrand heavily qualified the 1992 accounts of Orion and its subsidiary, saying there were 'material uncertainties' attached to the provisions made for the expected ultimate cost of outstanding claims and the realisable amount of reinsurance recoveries. At the time Orion said it continued to dispute liability for many of the pollution claims.Reuse content