Kaplan & Ors, Re

A company authorised to conduct insurance and reinsurance business may fall outside the statutory definition of a UK insurer where, in practice and in accordance with its permission, it conducts only reinsurance business. A pure reinsurer is not an insurance undertaking for the purposes of the Insolvency Regulation. The Insolvency Regulation therefore applies to its administration where the statutory exclusion for insurance undertakings does not apply. The court retains jurisdiction to make the administration order under either the Insolvency Regulation or domestic insolvency law.

The applicants sought an administration order for an authorised insurance company which had conducted only reinsurance business and had been in run-off for many years. The company could not be placed into administration out of court because it was an insurance entity.

The central issue was whether Council Regulation 1346/2000 on insolvency proceedings, EC Directive 2001/17/EC on the reorganisation and winding up of insurance undertakings, or the Insurers (Reorganisation and Winding Up) Regulations 2004 governed the proposed administration. The issue affected the applicable administration regime, although not the court’s jurisdiction to make the order.

1. The application for an administration order was granted. The court was satisfied that the statutory and procedural requirements had been met.
2. Article 1(2) of Council Regulation 1346/2000 excludes insolvency proceedings concerning insurance undertakings, but the Regulation does not define that expression. Its meaning had to be determined by considering relevant European and domestic legislation.
3. Article 1(1) of EC Directive 2001/17/EC concerns insurance undertakings officially authorised under directives applying to direct insurance, not reinsurance. The domestic definition of a UK insurer likewise excludes a person who, in accordance with its permission, conducts the relevant activity exclusively in relation to reinsurance contracts.
4. The natural reading of that domestic carve-out focuses on the business actually carried on, rather than on activities which the company could potentially conduct. The company was therefore not a UK insurer for the purposes of the Insurers (Reorganisation and Winding Up) Regulations 2004.
5. The court preferred the view in Cross Border Insolvency that a pure reinsurer falls within the Insolvency Regulation. The reasoning in Re DAP Holdings NV, [2005] EWHC 2092, [2006] BCC 48, supported the conclusion that a reinsurer only falls outside the European definition of an undertaking carrying on insurance business.
6. The administration order was made on the basis that the Insolvency Regulation applied. Even if that conclusion were wrong, the court had jurisdiction under domestic rules, and the only consequential error would concern the declaration as to the applicable regime.