Insurance Business Transfers

In the last 12 months we have advised a number of insurers seeking to restructure their European insurance businesses. This appears to be a result of the current geopolitical and regulatory landscape, as well as a buoyant insurance mergers and acquisitions market. We expect this trend to continue as Brexit draws closer.

In the UK, Part VII of the Financial Services and Markets Act 2000 permits the transfer of insurance business, subject to the sanction of the High Court, to a transferee located within the UK or EEA (a Part VII Transfer). Part VII Transfers are commonly used in restructurings of insurance businesses.

However, Jersey, Guernsey and the Isle of Man are not part of the UK or the EEA and so a Part VII Transfer may not apply to insurance business carried out on those Islands. As such, any insurer which has a presence in, or which has policyholders who are resident on these Islands, seeking to transfer policies to another insurance company will need to consider whether the approval of the local court will be required.

Each of the Islands have their own regime for transferring insurance business from one company to another by way of a court approved process, known as a "scheme", all of which are similar to, and can be done in conjunction with, a Part VII Transfer.

In many cases, a parallel scheme is often required. Therefore it is important that comprehensive due diligence is conducted to identify whether a parallel scheme will be needed at the earliest opportunity.

A summary of the law and process for the insurance business transfers specific to each Island is set out below. However, in all cases detailed legal advice should be obtained on whether a scheme will be required and the local regulator notified.

Jersey

Any insurer carrying on insurance business in or from Jersey is required to hold a permit granted by the Jersey Financial Services Commission (the JFSC). The Insurance Business (Jersey) Law 1996 (the Jersey Insurance Law) requires a scheme to approve a transfer of insurance business from a permit holder. As such, a Part VII Transfer will not be effective to transfer the Jersey business, and a transfer of insurance business which is carried on in or from Jersey is very likely to require a scheme (we note that there are very limited circumstances in which a scheme may be avoided, for example all the relevant policies are novated with the consent of all policyholders).

Under the Jersey Insurance Law, to effect a scheme in...