In the matter of USAA Limited

Under Part VII of the Financial Services and Markets Act 2000, the court may sanction an insurance business transfer scheme where the statutory certificates, authorisations and procedural requirements are satisfied and sanction is appropriate in all the circumstances. In assessing appropriateness, the court must weigh the scheme’s effects on policyholders, reinsurers and other interested parties, including policyholder security and the practical consequences of refusing the transfer. A Brexit-related scheme may properly be sanctioned where it provides continuity and certainty for cross-border policy servicing, the independent expert identifies no material adverse impact, and the regulators raise no objection. A communications error does not necessarily prevent sanction where all material information was provided and affected parties suffered no detriment.

USAA Limited, an English insurer, applied jointly with USAA S.A., a Luxembourg insurer, and its UK branch for sanction of an insurance business transfer scheme under Part VII of the Financial Services and Markets Act 2000. The scheme transferred run-off motor, property and general liability insurance business written in the UK and EEA. It formed part of a group reorganisation prompted by the loss of EU passporting rights following Brexit.

The issues were whether the transitional provisions applied, whether the statutory certificates, authorisations and notification requirements had been satisfied, and whether it was appropriate in all the circumstances to sanction the scheme despite an error in the policyholder communication pack.

1. Statutory requirements. The scheme qualified for the transitional regime because the relevant fee had been paid and the independent expert had been nominated or appointed before 31 December 2020. The scheme fell within the statutory definition, the application was properly made, and the required certificates and authorisations had been obtained.
2. Tacit consent. The PRA’s certificate complied with paragraph 3A of Schedule 12. The question whether certification should be provided by the home-state regulator or by the PRA was academic because both certificates were available. The court’s approach was consistent with Re Royal London Mutual Insurance Society Ltd [2019] EWHC 185 (Ch).
3. Communications. Although the communication pack contained the Directions Order rather than the formal legal notice, it contained all material information. There was no detriment to policyholders or claimants, and the omission did not prevent sanction.
4. Discretion. The court accepted the independent expert’s conclusion that the transfer would have no material adverse impact on affected policyholders and no material impact on reinsurers. The scheme provided certainty and continuity of service for EEA policyholders whose policies might otherwise be difficult to administer after Brexit. Applying the balancing exercise identified in Re Society of Lloyd’s and Lloyd’s Insurance Co SA [2020] EWHC 3266 (Ch), the scheme was appropriate in all the circumstances.
5. The scheme was sanctioned and appropriate ancillary orders were made.