AIG Europe Ltd & Anor, Re

Part VII of the Financial Services and Markets Act 2000 permits an insurance business transfer scheme to use more than one transferee and different legally recognised transfer mechanisms, including a cross-border merger. The court may sanction the scheme under section 111 and make ancillary orders under section 112 even where part of the business is transferred by merger rather than by a section 112(1)(a) order.

The decisive question is whether the scheme as a whole is fair between the affected classes. Individual adverse effects do not necessarily require refusal, particularly where the alternative creates a greater and more immediate risk of policyholder prejudice. The court must exercise a real discretion, informed by the independent expert and regulators, and is not required to devise the best possible scheme.

AIG Europe Limited sought court sanction for a reorganisation connected with the United Kingdom’s proposed withdrawal from the European Union. Its UK and non-EEA insurance business was to transfer to American International Group UK Limited under section 112 of the Financial Services and Markets Act 2000. Its European and Swiss business was to transfer to AIG Europe SA through an EU cross-border merger.

The applications sought sanction under sections 104 and 111 FSMA, ancillary orders under section 112, and a pre-merger certificate under regulation 6 of the Companies (Cross-Border Mergers) Regulations 2007. The central issues were whether the combined structure was legally permissible, whether ancillary orders could support the merger transfer, whether policyholders would suffer material prejudice, and whether the statutory pre-merger requirements had been met.

1. Jurisdiction and sanction. The combined scheme was permissible. Section 105 FSMA refers to a transfer of insurance business and does not restrict the number of transferees or require a particular transfer mechanism. A cross-border merger recognised by English law could therefore achieve part of the transfer, subject to court sanction under section 111. The use of the merger did not restrict the court’s discretion.
2. Ancillary orders. The court could make orders under section 112(1)(c) for proceedings and claims to continue against the transferees, including AIG Europe SA following the merger. The power did not depend on an order under section 112(1)(a). Orders under section 112(1)(d) could give effect to the scheme’s split-policy, reinsurance and related provisions where necessary to carry it out fully and effectively.
3. Fairness and material prejudice. Applying the principles summarised in Re AXA Equity & Law Life Assurance Society plc and AXA Sun Life plc [2001] 1 All ER (Comm) 1010, the court considered the security and reasonable expectations of policyholders before and after the scheme. The independent expert’s evidence and the regulators’ views were important but did not reduce the court’s discretion to a rubber stamp. The scheme was fair as a whole. Any remote loss of access to the Financial Services Compensation Scheme was outweighed by the risk that, without restructuring, policyholders could lose effective servicing after Brexit.
4. The court was not required to select the best possible scheme. The directors’ commercial choice remained relevant where the available schemes were fair. The statutory requirements and necessary certificates and authorisations had been satisfied.
5. The scheme was sanctioned. Orders were made under section 112, and a regulation 6 pre-merger certificate was issued. No creditor meeting was required because the evidence showed no material prejudice to creditors.

First-instance applications in the High Court (Chancery Division). The scheme was sanctioned and the pre-merger certificate issued.