Aviva International Insurance Ltd, Re

When statutory notice requirements for an insurance business transfer cannot be followed strictly, the court may waive them if alternative arrangements substantially fulfil the notice requirement’s protective purpose. Relevant considerations include the impossibility, practicality and utility of contacting policyholders; alternative information channels; proportionality; collateral commercial concerns; and the transfer’s purpose and likely impact. The factors are non-exhaustive, are not formal conditions, and need not receive equal weight. The assessment is fact-sensitive. Extensive direct and indirect communications, together with advertising and accessible information channels, may justify waiver where strict compliance is impracticable and policyholders suffer no material prejudice.

Aviva International Insurance Limited applied under Part VII of the Financial Services and Markets Act 2000 for directions concerning a proposed transfer of general insurance and London Market business within the Aviva group. The intended sanction hearing was to follow in October 2011.

The application sought waiver of the requirement in regulation 3(2)(b) of the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 to send notice of the application to every policyholder. The central issue was whether the proposed combination of direct notifications, broker and corporate-partner communications, advertising, website information and a telephone helpline could adequately fulfil the protective purpose of individual notice.

1. Waiver jurisdiction and purpose. The court held that the power under regulation 4(2) of the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 was unfettered, but that regulation 3(2)(b) was not a purely formal requirement. Its purpose was to enable affected policyholders to make written representations or appear at the sanction hearing.
2. Relevant considerations. The court agreed with the approach endorsed in Re Direct Line Insurance, citing [2011] EWHC 1482 and [2011] EWHC 1667. Relevant matters included the impossibility, practicality and utility of contacting policyholders, alternative information channels, proportionality, collateral commercial concerns, and the transfer’s object and likely impact. The factors were non-exhaustive and fact-sensitive. They were not formal requirements, and equal weight need not be given to each factor.
3. Application to the general insurance business. The proposed direct letters, broker and corporate-partner arrangements, formal and informal advertisements, website and helpline were sufficient, taken together, to achieve the objective of regulation 3(2)(b). Strict compliance was impracticable because historic records were incomplete or out of date and relevant customer data was held by intermediaries. There was no material prejudice, and policyholders generally held short-term annually renewable policies which could readily be placed elsewhere.
4. London Market business. The business was substantially in run-off and concerned long-tail liabilities. It was proportionate to waive notice to the remaining claimants whose claims represented only 1 per cent of outstanding reserves, having regard to the transfer’s nature, the continuing National Indemnity Company indemnity, and the other notification processes.

The court approved the waivers sought and ordered the transfer process to proceed in the form requested.