UK insurer Royal & Sun Alliance has reached a settlement with PNC Bank as part of an ongoing legal dispute over student loan insurance policies in the US.
PNC had been one of four banks to initiate legal action against Royal & Sun Alliance’s US subsidiary Royal Indemnity Company (RIC) in 2002, after the unit attempted to cancel credit risk policies with Student Finance Corporation (SFC). RIC had alleged that SFC, which provided loans to students, was involved in fraudulent activities.
Having provided financial guarantees to bondholders of SFC, Wells Fargo, MBIA, Wilmington and PNC sued RIC to enforce the policies. Royal & Sun Alliance is currently appealing against US federal district court decisions which ruled in favor of the banks.
As a result of the settlement, PNC has now agreed to discontinue its part of the legal action. Royal & Sun Alliance said that potential costs in the case had therefore been cut by $129 million.