Relaxation Of The Part VII Market

• Published date: 17 November 2020
• Subject Matter: Finance and Banking, Insurance, Financial Services, Insurance Laws and Products
• Law Firm: William Fry
• Author: Mr John Larkin, Eoin Caulfield and Ian Murray

On 20 August 2020, the English High Court sanctioned an insurance business transfer scheme under Part VII of the UK's Financial Services and Markets Act 2000 in Re Legal and General Assurance Society Ltd and another [2020] EWHC 2299 (Ch).

The significance of this decision is that it can be distinguished from the 2019 decision (currently under appeal) of the English Courts in the case involving a transfer from Prudential to Rothesay in which the Court, having taken policyholders' interests into account, refused to sanction the transfer. Market commentators note that the Prudential/Rothesay decision may be confined to the specific facts of that case and anticipate that insurance business transfer schemes may now be able to rely on the decision in Re Legal and General.

As both the Legal and General case and the Prudential-Rothesay cases were decisions of the English Courts, they are not binding on the Irish courts. That said, we expect that both cases (and the Legal and General case in particular) will be carefully considered by the Irish Courts when considering portfolio transfers by Irish insurance companies.

Re Legal and General Assurance Society Ltd and another [2020] EWHC 2299 (Ch)

In this case, Legal and General, for commercial reasons, sought to transfer its traditional insurance-based savings, pensions, life and with-profits business to Reassure, a specialist in acquiring and consolidating similar books of business.

In deciding to sanction the transfer, the Court made clear that a balance must be struck between the commercial interests of the transferor and transferee, and those of the policyholders in question. That is not to say that a proposed transfer, that is proposed from a purely commercial perspective, should not be given effect. The test is whether, or not, the interests of policyholders would be adversely affected to such an extent that the transfer cannot be sanctioned.

Distinction from Prudential/Rothesay

In August 2019, the English Court declined to sanction the transfer of a portfolio of annuities from Prudential to Rothesay following complaints from policyholders. Where a transferor/transferee can distinguish its transfer application from the facts of the Prudential/Rothesay case, they may benefit from the more...