Tower Group of Companies shareholders have overwhelmingly backed a deal that would see fellow Bermuda-based company ACP Re take over the struggling insurer.

The takeover has been approved by 98.5 percent of voting shareholders, the company announced in a stock exchange announcement on August 6.

The Tower Group has faced difficulties since last year. When AM Best downgraded the Tower Group companies in October 2013, they explained that “the reserve charge indicated by Tower on October 7 (2013) was well in excess of a $60-$110 million range initially indicated by the insurer in an August 8 (2013) press release. In addition, Tower is taking a goodwill impairment charge of $215 million as a result of the reserve actions already taken.

In addition to considering the magnitude of the charges and their ‘material adverse impact on Tower’s risk-adjusted capitalisation’, Best also said the rating actions also considered reduced financial flexibility given a delay in Tower’s earnings announcement which fuelled a decline in shareholder confidence and a corresponding decline in share price.

If the deal closes, Tower Group’s shareholders will get $2.50 cash per share from ACP Re. The reinsurer is a takeover vehicle whose major shareholder is a trust established by AmTrust Financial founder Michael Karfunkel.

AmTrust, a multinational insurance holding company, announced yesterday in their second quarter results report that cut-through reinsurance agreements with Tower Group contributed $139 million to gross written premium.

Tower reported in a filing that 37,767,866 shares were cast in favour of the merger plan, with 500,777 votes against and 85,690 abstentions.

The filing stated that shareholders controlling 2,096,216 shares had voted against or abstained on the executive compensation agreement relating to the deal, which includes a payout to Michael Lee, the CEO who was at in charge when Tower ran into difficulties.