Lloyds Insurance Company SA, Re

When directing publicity for an insurance business transfer scheme, the court may waive prescribed notification requirements where complete compliance is impracticable and the alternative arrangements are reasonable and proportionate.

The central question is whether the communication plan enables persons who may be adversely affected to exercise their right to participate effectively. Relevant considerations include the practicality, utility and proportionality of notification, alternative information channels, the scheme’s purpose and likely impact, and collateral commercial concerns. The court may retain flexibility in the order where continuing regulatory oversight and the evidence supporting the waivers provide adequate safeguards.

The Society of Lloyd’s and Lloyd’s Insurance Company SA applied for directions in proceedings seeking sanction under Part VII of the Financial Services and Markets Act 2000 for a scheme transferring certain EEA-related insurance business from Lloyd’s members to the Belgian transferee.

The application concerned the proposed communication plan and waivers of statutory publicity and notification requirements. The scheme involved a very large number of policies, policyholders, market participants and reinsurers, while Lloyd’s lacked comprehensive access to policyholder contact data. The court also considered an amendment to the description of the transferring policies.

This was the second occasion on which the proceedings had been before the court. Norris J had previously expressed provisional views concerning the definition of the transferring policies.

1. Waivers. The court granted the requested waivers under regulation 4(2) of the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants Regulations) 2001. The court’s task was to assess whether alternative notification arrangements adequately served the purpose of enabling persons who might be adversely affected to make representations or appear at the sanction hearing.

2. Complete policyholder coverage was wholly impracticable. Having regard to the factors identified in Aviva International Insurance Limited [2011] EWHC 1901 (Ch), including the impossibility, practicality and utility of contacting policyholders, alternative information channels, proportionality, the scheme’s object and its likely impact, the focused “Match and Attach” exercise, direct communications with market participants, advertising, website publicity and response-management arrangements constituted a reasonable and proportionate alternative.

3. The waiver of the requirement to notify every policyholder was appropriate. The same policy applied to the proposed waiver concerning reinsurers. Although the communication exercise might not achieve complete compliance, the proposed work with managing agents, widespread advertising and notification of reinsurers and security providers adequately served the underlying purpose of the requirement.

4. The scheme’s non-commercial and policyholder-neutral character was a relevant consideration. The court accepted that some latitude was appropriate in circumstances where the scheme responded to external regulatory uncertainty and was designed to avoid economic prejudice to policyholders, consistently with the reasoning cited from Aviva Life and Pensions UK Limited [2019] EWHC 312 (Ch).

5. The order did not need to prescribe every step of the communication plan. Flexibility was appropriate because notification remained subject to continuing regulatory review, with the court also able to consider compliance at the sanction stage.

6. Permission was granted to amend the claim form to reflect the refined description of the transferring policies. The court directed that an order be made in the draft form.

The judgment describes an earlier directions hearing before Norris J in the same proceedings, at which provisional views were expressed concerning the definition of the transferring policies. No appeal history is stated.