Legal And General Assurance Society Ltd, Re

When sanctioning an insurance business transfer scheme, the court must exercise its discretion under Financial Services and Markets Act 2000 by considering whether the scheme is fair in all the circumstances. The inquiry is not confined to actuarial solvency metrics or service standards, although those are usually important. The court must compare the position before and after the transfer and assess real, material risks rather than theoretical possibilities. Commercial benefits to the transferor do not prevent sanction where the scheme does not materially disadvantage policyholders. The court is not required to devise the best possible scheme or improve individual provisions. Part VII may also modify policyholders’ contractual rights and authorise ancillary transfers where necessary to make the scheme fully effective.

Legal and General Assurance Society Limited applied under Part VII of the Financial Services and Markets Act 2000 for sanction of a scheme transferring approximately 900,000 insurance policies and associated assets to ReAssure Limited. Policyholders objected on grounds including ReAssure’s financial strength, reputation, service standards, parental support, the effect of the Covid-19 pandemic, the independent expert’s independence, and the absence of policyholder consent. The Financial Conduct Authority and Prudential Regulation Authority did not object. The central issue was whether, considering all the circumstances, the proposed transfer was appropriate and fair to the affected policyholders.

1. Scheme sanctioned. The court was satisfied under section 111(3) of the Financial Services and Markets Act 2000 that the scheme was fair in all the circumstances and would not materially adversely affect the relevant policyholders.
2. The court’s discretion was broad. It was not restricted to solvency or actuarial criteria. The court had to balance the commercial interests of the transferor and transferee against the interests of different groups of policyholders, considering real rather than fanciful risks. Policyholders’ subjective preference to remain with the transferor was relevant but carried limited weight.
3. The transferor’s strategic objective of withdrawing from a closed book of insurance business was a legitimate commercial objective. The court was not required to identify a better scheme or amend provisions which might have been improved. The transfer produced operational and policyholder benefits through economies of scale, fixed expenses and possible future fund mergers.
4. The independent expert’s conclusions were entitled to substantial weight, but the court had to receive sufficient underlying information to test whether any adverse effect was material. Updated financial and Covid-19 evidence provided adequate assurance that ReAssure remained financially strong and that the comparative effect of the pandemic did not materially disadvantage transferring policyholders.
5. The court rejected objections based on reputation, parental support and service levels. ReAssure and its parent had substantial resources and a commercial incentive to retain policyholders and acquire further closed books. The evidence did not establish a material risk of deterioration in service.
6. Part VII could override contractual restrictions on transfer and could modify policyholders’ contractual rights where appropriate. Ancillary orders under section 112(1)(d) were permissible where the transfers were incidental, consequential or supplementary and necessary to secure full and effective implementation. The proposed transfers of ancillary arrangements, SIPP assets and stakeholder-pension particulars satisfied that test.
7. The scheme was accordingly sanctioned, with the ancillary orders sought.