ReInsurance and Reinsurance - Weekly Update 17.7.2012

Provident Insurance PLC & others v FSA

Part VII transfers where transferor authorised in Gibraltar/notification requirement

http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/ EWHC/Ch/2012/1860.html&query=title+(+provident+and+fin ancial+and+services+and+authority+)&method=Boolean

Clyde & Co for applicants

This case was novel in that it involved the first (so far as the parties were aware) insurance business transfer scheme under Part VII of the Financial Services and Markets Act 2000 ("FSMA") involving the transfer of the insurance business from a firm authorised in Gibraltar to a firm authorised in the UK. The first issue to be addressed, therefore, was whether the court had the power to sanction the scheme under section 111 of FSMA.

This in turn required an examination of section 105 of FSMA and, in particular, whether the following condition was satisfied: "the whole or part of the business carried on in the United Kingdom by an authorised person who is neither a UK authorised person nor an EEA firm but who has permission to effect or carry out contracts of insurance .... is to be transferred to another body". Henderson J held that the Gibraltarian firm was not an EEA firm. However, all of its business is carried on in the UK under the so-called passporting rights conferred by the Financial Services and Markets Act 2000 (Gibraltar) Order 2000. As a result of this Order, the judge concluded that the Gibraltarian firm did have "permission to effect or carry out contracts of insurance" and so the court did have jurisdiction to deal with the transfer.

The applicants also sought certain waivers of the notification requirements contained in the Transfer Regulations. Some of those waivers were uncontroversial and were approved by Henderson J who highlighted that this shows "to my mind, the benefits of an early dialogue and negotiation between the claimants and the FSA". In relation to two disputed waivers, the judge cautioned that an "appeal to the virtues of realism needs to be treated with some caution when what is proposed is that some 100,000 present and recent policyholders of [one of the proposed transferors], and a smaller, but still substantial, number of policyholders of [the proposed transferee] should receive neither direct notification of the scheme, nor targeted advertisements designed to bring it to their attention. That is a very large constituency of policyholders to disenfranchise, so to speak, even if most of them - through no fault of their own - are probably unaware of the identity of their insurer, and even if the scheme appears to be a straightforward one which, on the available evidence, is likely to attract the approval of the court in due course".

However, the judge was prepared to allow the parties to consider whether some form of targeted advertising might be possible.

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