Revisiting The "Old Chestnut": The Inherent Discretion To Confirm The Powers Of Controllers Appointed Under Section 24 Of The Insurance Law

• Published date: 23 November 2020
• Subject Matter: Insurance, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Insurance Laws and Products
• Law Firm: Walkers
• Author: Mr Rupert Bell, Chris Keefe and Daisy Boulter

On 29 September 2020, Chief Justice Smellie QC handed down his judgment in the Matter of Premier Assurance Group SPC Ltd (in Controllership) (FSD Cause No. 210 of 2020) confirming the powers of the controllers appointed under section 24(2)(h) of the Insurance Law, 2010 (the "Insurance Law") so as to enable them to exercise their powers as against the "world at large". In doing so, the Chief Justice held that the Court has an inherent jurisdiction to supplement section 24 of the Insurance Law to "fill the practical gap" left by that provision.

Background

The Controllers were appointed by the Cayman Islands Monetary Authority (the "Authority") on 14 September 2020 pursuant to section 24(2)(h) of the Insurance Law to assume control of the affairs of Premier Assurance Group SPC Ltd ("PAG"), an exempted segregated portfolio company.

All "powers necessary" to administer the affairs of the licensee

Section 24(2)(h) provides that a controller appointed by the Authority in the circumstances set out in section 24(1) of the Insurance Law shall have "all the powers necessary" to administer the affairs of the licensee.

On the face of section 24 of the Insurance Law, the necessary powers vested by the Authority to administer the affairs of the licensee are not expressly set out, nor are they required to be confirmed or sanctioned by the Court. However, as explained below, previous authorities in relation to controllerships arising under section 18(1)(v) of the Banks and Trust Companies Law (as revised) (the "BTCL") have held that the person appointed may require confirmation from the court before their powers are "effective" as against the world at large.

Accordingly, the Controllers in this case sought an order confirming their powers under section 24(2)(h) of the Insurance Law to ensure that they were effective against third parties. There was no statutory jurisdiction for making the making of a confirmatory order of the kind sought in this case, nor any direct authority for the making of such an order.

Need to exercise powers as against the "world at large"

The Court had previously provided guidance in relation to controllerships commenced under section 18(1)(v) of the BTCL, which incorporates by reference section 18 of the Bankruptcy Law. In particular, the Courts have grappled with the apparent inconsistency between:

(a) the statutory powers vested in the Authority under the BTCL for the appointment of controllers with all the powers of a receiver or manager under...