Jersey Unreported Judgments

Insurance - sanctions hearing for the proposed transfer of the general insurance business.

[2020]JRC041

Royal Court

(Samedi)

6 March 2020

Before     :

J. A. Clyde-Smith OBE., Commissioner, and Jurats Austin-Vautier and Averty.

 

IN THE MATTER OF THE REPRESENTATION OF EC INSURANCE COMPANY LIMITED AND MARKEL INTERNATIONAL INSURANCE COMPANY LIMITED

AND IN THE MATTER OF AN APPLICATION PURSUANT TO ARTICLE 27 AND SCHEDULE 2 OF THE INSURANCE BUSINESS (JERSEY) LAW 1996

Advocate E. B. Drummond for the Representors

judgment

the Commissioner:

1.        This is the sanctions hearing for the proposed transfer of the general insurance business carried on by the First Representor ("the Transferor") to the Second Representor ("the Transferee"), pursuant to a scheme which we will refer to as the "Jersey Scheme".  

2.        The background is set out in the Representation.  On the 28^th November, 2017, Markel Capital Holdings Limited, which already wholly owned the Transferee, acquired the Transferor.  The purchase lead to a duplication of underwriting capabilities between the Representors.  On the 1^st April, 2018, all the Transferor's employees were transferred to another group company called Markel International Services Limited, which is also the employer of all of the Transferee's staff.  On the 1^st October, 2018, the Transferor ceased writing new business. 

3.        The Transferor benefits from third party reinsurance and cedes all remaining liabilities to the Transferee such that the Transferor retains no liabilities on a net of reinsurance basis.  The intention is to transfer the entirety of the Transferor's insurance business to the Transferee following which the Transferor will be wound up.  

4.        The number of transferring policies is around 421,000 as at the 31^st December, 2018, of which only 63 had been identified as policies written in Jersey.  It is proposed that the UK insurance business conducted by the Transferor will transfer pursuant to the UK Scheme, subject to approval being granted by the High Courts of England and Wales.  The Jersey insurance business will transfer in accordance with the terms of the Jersey Scheme subject to this Court's approval. 

5.        We are satisfied from the evidence that the procedural requirements of Schedule 2 of the Insurance Business (Jersey) Law 1996 have been met and in terms of the merits, we have had regard to the legal principles conveniently summarised in the two local cases of: Representation of Royal London 360 Limited and Royal London 360 Insurance Company Ltd, [2011] JLR [note 43] and Representation of Prudential Annuities Limited and the Prudential Assurance Company Limited [2014] JRC 178A  We will not set out those principles again in this short judgment.  

6.        We agree that we should exercise our discretion to sanction the Jersey Scheme for the reasons put forward by Advocate Drummond in his skeleton argument as follows:-

(1)       Due recognition should be given to the commercial judgment of both the Transferor and the Transferee to proceed with the Jersey Scheme.  In this case, the Transferor and Transferee are under common ownership.  At present, the Transferor has no employees, writes no new business and retains no liabilities for existing policies - its liabilities are either reinsured to third parties or ceded to the Transferee already. The UK Scheme and Jersey Scheme will transfer the remaining insurance business to the Transferee, so the Transferor can be wound up.

(2)       No policyholder, employee or other interested person is likely to be adversely affected by the Jersey Scheme.  In that respect we have been given a letter today from the Comptroller of Income Tax confirming that there are no Jersey tax implications to the Jersey policy holders as a result of the Jersey Scheme. 

(3)       The actuarial judgment of the independent expert regarding the proposed transfer of all of the Transferor's policyholders to the Transferee via the UK and Jersey Schemes (which he defines as the "Proposed Transfer"), in relation to the Transferor's policyholders who are being transferred across, is that:

(i)             the security provided will not be materially adversely affected by the Proposed Transfer; and

(ii)            there will be no material impact on service standards. 

(4)       In relation to the existing policy holders of the Transferee he advises that:

(i)         the security provided will not be materially adversely affected by the Proposed Transfer; and

(ii)           there will be no material impact on service standards.  

(5)       Finally he advises that the reinsurers will not be materially affected by the Proposed Transfer.  These conclusions have been further confirmed by the independent expert's supplementary report. 

(6)       The Jersey Financial Services Commission confirmed on the 2^nd March, 2020, that it had no objections or specific comments in relation to the Jersey Scheme:  "subject to there being no adverse responses from other regulators or the English High Court."  The Prudential Regulation Authority (the PRA) and the Financial Conduct Authority (the FCA) confirmed on the 3 March, 2020, that they do not object to the UK and Jersey Schemes.  

(7)     The English High Court has yesterday approved the UK Scheme.  At the last moment there was apparently one objection to the UK Scheme in relation to historical policies.  That objection has been shown to the independent expert who has confirmed that it does not affect his opinion.  It has also been shown to the PRA who say it has no material impact upon the PRA's statutory objectives and similarly the FCA have confirmed that it gives no reason for it to object to the scheme.  

(8)     No policy holder, employee or other interested person is likely to be adversely affected by the Jersey Scheme and we agree that the scheme, as a whole is fair and, apart from that one objection which has been dealt with, there are no other objections to the UK or Jersey Schemes and no one has appeared here today to do so. 

(9)     The directors of the Transferor and Transferee have chosen this route to pursue. 

7.        So for all those reasons as put forward by Advocate Drummond, we grant the application and grant the prayers as set out in the Representation.  There will be no order as to costs.  

Authorities

Insurance Business (Jersey) Law 1996.

Representation of Royal London 360 Limited and Royal London 360 Insurance Company Limited [2011 JLR Note 43]

Representation of Prudential Annuities Limited and the Prudential Assurance Company Limited [2014 JRC 178A].