AMT Mortgage Insurance Ltd & Ors, Re

On an insurance business transfer under Financial Services and Markets Act 2000, the court must first ensure that the prescribed technical requirements are met. It then exercises an absolute and independent discretion whether to sanction the scheme. The central question is whether the scheme is fair between the interests of the affected parties.

The court is assisted by the independent expert’s actuarial assessment of rights and expectations before and after transfer, and may place weight on the regulators’ views and conduct. A change in the nature of policyholders’ risks does not itself establish material adverse effect if overall security is maintained. A reduction in a solvency ratio must be assessed in the context of the applicable one-year solvency regime and its probability threshold.

Two connected, but non-interconditional, insurance business transfer schemes were brought under Part 7 of the Financial Services and Markets Act 2000. Pedigree Livestock Insurance Limited sought to transfer its pet-insurance business, and AMT Mortgage Insurance Limited sought to transfer its UK mortgage-credit insurance policies, to AmTrust Europe Limited.

The schemes formed part of a group reorganisation. The court considered the effect on transferring policyholders, remaining policyholders and AmTrust’s existing policyholders, including a proposed split of a parent-company guarantee and reinsurance arrangements. The independent expert found no material adverse effect on the relevant policyholders’ security. The issue was whether the statutory requirements were satisfied and whether, in all the circumstances, the schemes should be sanctioned.

1. The court held that the prescribed technical requirements under the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 were satisfied. It therefore addressed the discretionary question under section 111(3).
2. The court adopted the settled approach summarised in Re Prudential Annuities Limited [2014] EWHC 4770. The court has an absolute and independent discretion. It must consider whether the scheme is fair between the interests of the affected parties. The assessment is primarily actuarial and concerns policyholders’ rights and expectations before and after implementation. The independent expert’s report is central to that assessment. Regulators may appear to seek sanction, and the court may rely on their views and draw inferences from their attendance or non-attendance.
3. The independent expert identified the affected classes and conducted stress testing. Although transferring policyholders’ exposure would change in character, from severe Italian housing-market deterioration to severe claims in AmTrust’s Italian medical-malpractice book, the expert found no material adverse effect on overall security. The same conclusion applied to the remaining Mortgage policyholders and AmTrust’s existing policyholders. The court saw no reason to go behind that assessment.
4. The court relied on Re Prudential Assurance Company Limited [2018] EWHC 3811 in understanding the effect of a lower solvency ratio. The applicable regime seeks to maintain solvency over one year with a 99.5 per cent probability; an excess above that level increases the probability of solvency only marginally. AmTrust remained sufficiently capitalised, and the updated figures did not alter the expert’s conclusions.
5. The FCA regarded the schemes as reasonable, the PRA identified no issue causing it to object, and there were no objectors. The court approved both transfers. It was also satisfied that the provision for Pedigree to be dissolved without winding up fell within the orders contemplated by section 112. Approval was subject to the intended undertaking from the ultimate parent concerning the guarantee.

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