Legal And General Assurance Society Ltd, Re

This was an application under Part VII of the Financial Services and Markets Act 2000 to sanction a scheme transferring long‑term insurance business from Legal and General Assurance Society Limited (LGAS) to ReAssure Limited. The court applied the established principles under section 111 FSMA, giving close attention to the independent expert's report, and to the regulatory assessments of the Prudential Regulation Authority and the Financial Conduct Authority.

The judge concluded that the transfer would not have a material adverse effect on affected policyholders having regard to: the independent expert's analysis of Solvency II technical provisions and SCR coverage ratios; the availability of parental/group support; the protections embodied in the Scheme (including the Fixed Expense Agreement for the with‑profits fund, governance safeguards, regulatory oversight and independent actuarial review); and the operational migration readiness including additional testing carried out after the Covid‑19 interruption. The court also authorised ancillary orders under section 112(1)(d) FSMA to secure effective transfer of related contractual and trust arrangements (notably for SIPPs and stakeholder pensions) and approved provisions for the management of the LGAS with‑profits fund (including merger and sunset provisions subject to safeguards).

Background and procedural posture. LGAS, a long‑established authorised insurer, sought court sanction under Part VII FSMA for the transfer of approximately 900,000 policies and assets of about £30 billion to ReAssure, a specialist consolidator of closed life and pensions books. The application followed execution of a business transfer agreement and a contemporaneous risk transfer/reinsurance agreement. The sanction hearing began in March 2020, was adjourned in the light of Covid‑19 (short judgment at [2020] EWHC 756 (Ch)) and resumed by remote hearing in August 2020.

Nature of the application (relief sought). The applicants sought an order under section 111 FSMA sanctioning the Part VII insurance business transfer scheme and ancillary orders under section 112(1)(d) FSMA to effect related transfers of assets, contractual rights and trust arrangements necessary for a seamless migration (including SIPP and stakeholder pension arrangements and with‑profits fund management powers).

Issues framed by the court. The principal issues were whether the Scheme was appropriate to sanction under section 111(3) FSMA, focussing on: (i) the independent expert's conclusion as to whether the Scheme would have a material adverse effect on any class of policyholders (assessing security of benefits, risk profile, reasonable expectations, and standards of administration); (ii) comparative solvency and SCR coverage ratios and the effect of Covid‑19; (iii) the likely availability and incentive for parental or group support post‑transfer; (iv) operational and data‑migration risks (including preparedness during the pandemic); (v) specific provisions affecting the LGAS with‑profits fund (Fixed Expense Agreement, £50m payment and the corrected description of that payment, merger and sunset clauses); and (vi) the scope and appropriateness of ancillary orders under section 112(1)(d) to transfer related non‑insurance assets and contractual arrangements (including SIPP and stakeholder scheme particulars and tax declarations).

Court’s reasoning and conclusions. The judge gave careful weight to the independent expert (Mr Oliver Gillespie), the PRA and FCA reports and the objections of policyholders. The independent expert's analysis of solvency metrics at multiple "as at" dates (including updated reports to reflect market volatility during Covid‑19) and stress‑testing supported his conclusion that no material adverse effect would arise. The PRA and FCA raised no objection. The judge addressed prominent policyholder concerns (choice of provider, parental support, service standards, historic complaints data, independence of the expert, and the timing given Covid‑19) and distinguished the decision in Prudential/Rothesay on its facts. The court accepted that the Fixed Expense Agreement had been properly characterised (the £50m is consideration for the agreement, not an unlawful migration cost borne by policyholders) and found safeguards around LGAS with‑profits fund provisions appropriate. The judge also concluded ancillary orders under section 112(1)(d) were necessary and appropriate to secure a full and effective transfer, notably for SIPPs and stakeholder pensions, and that the Scheme as a whole was fair. The application was therefore sanctioned.

The court sanctioned the Part VII transfer scheme. The judge held that, having regard to the independent expert's reports, the PRA's and FCA's assessments, the procedural safeguards and the specific protections and regulatory oversight built into the Scheme (including for the LGAS with‑profits fund and the ancillary orders required for SIPPs and stakeholder pensions), the Scheme would not materially adversely affect the relevant classes of policyholders and it was therefore appropriate under section 111(3) FSMA to sanction the Scheme.

Original sanction application heard 10–12 March 2020 (March hearing); applicant companies applied to adjourn following onset of the Covid‑19 pandemic and the court granted an adjournment in a short judgment ([2020] EWHC 756 (Ch), 30 March 2020); the application resumed by remote hearing 13–14 August 2020; sanction judgment delivered as [2020] EWHC 2299 (Ch).