- September 7, 2017
- Posted by: Josiah Hincks Solicitors
- Category: Business Law Updates
Confidence in the insurance industry, and peace of mind for policyholders, demands that transfers of insurance business between providers are closely scrutinised by the courts. In one such case, a judge approved the dissolution of a technically insolvent insurer and the transfer of its policies to a secure and better capitalised home.
The insurer had closed to new business in 1991 and was wholly reliant on its parent company, which was under no obligation to continue to provide financial support. Its capital position had been described as woeful. In the circumstances, a scheme to transfer its business to another company was submitted to the High Court for approval under Section 112 of the Financial Services and Markets Act 2000.
In sanctioning the scheme, the Court noted that the company – which was viewed as probably the only suitable transferee – was extremely well capitalised and would remain so following the transaction. After analysing the contractual rights and reasonable expectations of policyholders, it found that the scheme would be fair to them and afford them a heightened level of security.
Regulators had expressed no objections to the scheme; the statutory requirements had been complied with and documents fully explaining the consequences of the transfer would be made available to policyholders. The transfer of the insurer’s remaining business would enable its orderly de-authorisation and dissolution without the need for winding up proceedings.