Re Windsor Life Assurance Company Ltd

When sanctioning an insurance business transfer scheme, the court exercises an absolute discretion but must give due recognition to the directors’ commercial judgment. It compares policyholders’ contractual rights, security and reasonable expectations before and after the transfer, giving close attention to the independent expert’s report and the regulator’s views.

The court assesses whether the scheme is fair overall between affected classes. Individual adverse effects do not necessarily require refusal, and the court need not devise a better scheme. A supplemental expert report dealing only with subsidiary matters does not restart the statutory 21-day period where the main scheme report was supplied in time.

NM Pensions Limited, NM Life Limited and Windsor Life Assurance Limited applied under Part 7 of the Financial Services and Markets Act 2000 for sanction of a scheme transferring the whole of the long-term business of NM Pensions and NM Life to Windsor Life, followed by the winding-up of the transferor companies.

Policyholders objected principally to reduced security, changes to governance protections, the absence of solvency projections, and the removal of a dividend block. The court also considered whether provisions of an earlier scheme required supervisory-board consent and independent advice, and whether a supplemental expert report had been provided sufficiently early. The central issues were whether the statutory and scheme requirements had been met and whether, in all the circumstances, sanction was appropriate.

1. Scheme requirements. The proposed transfer was a disposal within clause 48.5(b) of the earlier NM scheme. The supervisory board had approved it. The transfer also amended the NM scheme for the purposes of clause 59.2 because it replaced or altered numerous existing arrangements. The supervisory board had obtained independent legal advice and an independent actuarial opinion, and clause 59.2 was therefore satisfied.
2. Statutory approach. The court adopted the principles stated by Evans-Lombe J in Re Axa Equity and Law Life Assurance Society Plc; Re Axa Sun Life Plc [2001] 1 All ER 1010. The court had an absolute discretion, while recognising the directors’ commercial judgment. It had to compare the contractual rights and reasonable expectations of policyholders before and after the scheme, consider the independent expert’s report and the Financial Services Authority’s views, and assess fairness between affected classes as a whole.
3. Some reduction in security for NMP policyholders did not prevent sanction. The continuing security remained satisfactory, and the risks were remote. The court was not required to require compensation for every diminution or to substitute a scheme it considered better. The removal of the dividend block and absence of a 12-month solvency projection did not alter the relevant regulatory capital protection.
4. The statutory formalities under sections 109 to 111 of the Financial Services and Markets Act 2000 had been satisfied. A supplemental report dealing with a minor subsidiary amendment did not constitute the statutory scheme report for the purposes of the 21-day requirement. The main report had been supplied in time, so the court had jurisdiction to sanction the transfer.
5. The scheme was sanctioned, subject to satisfactory resolution of an outstanding regulatory matter in Spain. Further relief was reserved for argument.