Lloyd’s Insurance Company SA, Re

At an early stage of a proposed Part VII transfer, the court may give limited procedural assistance without expressing a provisional view on whether the scheme will ultimately be sanctioned. The proper question is whether the proposed course is obviously incapable of satisfying a statutory or authoritative criterion, so that there is an apparent roadblock. A negative answer does not determine the merits. The court may consider an incomplete application, provided the statutory requirements, including the independent expert’s report, are satisfied before the application progresses. In a large and complex transfer, proposed policy splitting, reinsurance arrangements, jurisdictional evidence and notification methods may be fit for consideration where they have a real prospect of satisfying the relevant requirements and are not obviously flawed.

Lloyd’s and Lloyd’s Insurance Company SA sought directions and eventual sanction under Part VII of the Financial Services and Markets Act 2000 for a proposed transfer of relevant non-life insurance business involving EEA risks or policyholders. The proposed transfer was intended to address the loss of passporting rights following the United Kingdom’s departure from the European Union.

The application was issued before the scheme had been settled and before an independent expert had been appointed. The court was asked to determine whether the proposed transfer structure, policy definitions, policy splitting, reinsurance, evidence of substantial purpose and notification arrangements were fit for consideration. The central issue was the extent to which the court could give non-binding assistance without improperly influencing the later sanction hearing.

1. Jurisdiction and procedural approach. The application was not barred because the settled scheme and independent expert’s report were not yet attached. The statutory requirement for a report applied to the process of making and progressing the application, rather than requiring the report to exist on the day the claim form was issued. The court also found no procedural objection under CPR 8.5 or Practice Direction 8APD7.
2. The court could express non-binding views in appropriate circumstances, including under its inherent jurisdiction and CPR 3.1(2)(m). However, it should approach prospective guidance with considerable caution because a provisional view might exert undue formative influence over a scheme which it would later have to scrutinise independently.
3. The appropriate early-stage question was whether any proposed course was obviously incapable of satisfying a criterion established by statute or authority. The court was not deciding a preliminary issue or expressing a view on the eventual outcome. Applying that approach, the proposed combined transfer was fit for consideration. There was a real prospect that Lloyd’s could act as transferor and that the business would be carried on from an EEA establishment.
4. The proposed definition of transferring policies was capable of achieving sufficient conceptual certainty, although further work was required. Policy splitting was not inherently fatal. Section 112(1)(d) of FSMA could support ancillary orders concerning split risks and reinsurance, subject to the detailed mechanics and the views of the regulators.
5. The proposed evidence for establishing that the transfer would achieve a substantial purpose was not obviously flawed. The proposed notification programme was also not obviously incapable of constituting fair communication. The dispensing power could potentially be exercised, having regard to practicality, utility, proportionality, available records, alternative communication methods and a suitable look-back period.
6. The court made an order, subject to possible variation, recording that no feature of the proposed scheme was presently seen as obviously incapable of satisfying a criterion required before sanction.

First-instance decision. No prior appellate decision was stated in the judgment.