The Copenhagen Reinsurance Company (UK) Ltd & Anor, Re

Under Part VII of the Financial Services and Markets Act 2000, the court has an absolute discretion whether to sanction an insurance business transfer scheme. The central question is whether the scheme, viewed as a whole, is fair between affected interests, assessed principally by comparing policyholders’ contractual rights, security and reasonable expectations before and after the transfer. The court should give substantial weight to the independent expert and regulators, but must exercise its own judgment.

The supplementary power in section 112(1)(d) is broad enough to support provisions necessary to carry out the scheme fully and effectively, including modification of related guarantees where their continuation forms part of policyholders’ legitimate expectations. The court may also order dissolution without winding up after the transfer is complete and the transferor has no remaining assets, liabilities or authorisation.

The applicant, an insurer in run-off, sought sanction under Part VII of the Financial Services and Markets Act 2000 for the transfer of its entire insurance business to its group company, followed by dissolution without winding up.

The scheme transferred policies, assets and liabilities without changing policy terms. Additional issues concerned the continuation of third-party guarantees benefiting certain policies, arrangements for a trust supporting United States policyholders, and the proposed dissolution. The central questions were whether the statutory conditions were met, whether the scheme was fair and whether the court had jurisdiction to make the supplementary orders sought.

1. Sanction of the scheme. The court was satisfied that the certificates, authorisations and procedural requirements under sections 104 to 108 and section 111 of the Financial Services and Markets Act 2000 had been met. The court’s discretion under section 111(3) required consideration of whether the scheme as a whole was fair between affected classes. The comparison focused on policyholders’ contractual rights, security and reasonable expectations before and after the transfer. The court was not required to identify or impose the best possible scheme.
2. The independent expert concluded that neither transferring CopRe policyholders nor Marlon’s existing policyholders would be materially adversely affected. The FCA and PRA raised no objection. Their views carried great weight, but the court was not a rubber stamp and independently assessed the evidence. The reduction in capital coverage ratio did not, without more, justify refusing sanction.
3. ILU Guarantees. Section 112(1)(a) addressed transfer of the transferor’s rights under reinsurance contracts, but did not permit variation of guarantees made between third parties. The appropriate jurisdictional basis was section 112(1)(d), which conferred broad power to make supplementary provision necessary to ensure that the scheme was fully and effectively carried out. The guarantees were integral to the relevant policies and formed part of policyholders’ legitimate expectations. Their continuation could therefore be secured by order, notwithstanding that the independent expert considered their absence unlikely to cause material prejudice.
4. The court was not acting in vain. The guarantees were governed by English law, and the scheme would retain substantial utility even if recognition of the guarantee order in another jurisdiction proved problematic.
5. CopRe Trust. The statutory provisions concerning transfer of property held by the transferor as trustee did not directly apply because the trust assets were held by a separate corporate trustee. Nevertheless, the court accepted the proposed general provision treating references to CopRe in documents relating to transferred policies as references to Marlon, particularly given the regulator’s consent and the trust’s limited protective role.
6. Dissolution. Under section 112(8)(b), dissolution without winding up was appropriate once the scheme had taken effect, CopRe’s assets and liabilities had transferred and its authorisation had been withdrawn. The scheme was sanctioned, supplementary provision was made concerning the guarantees, and dissolution without winding up was ordered.