Southern Rock Insurance Company Limited, Re

When sanctioning an insurance business transfer scheme, the court must first determine whether the statutory definition and formal requirements are satisfied. In exercising its discretion, the paramount concern is whether the transfer will materially adversely affect the payment of existing liabilities, the security of policyholders’ benefits, or relevant service standards. The court may consider the nature of the business, the circumstances giving rise to the scheme, the financial strength of the transferee, continuity of administration, and regulatory views. Gibraltar-based firms continued to qualify as authorised persons where the statutory saving provisions preserved the relevant market-access regime.

Southern Rock Insurance Company Limited and Alwyn Insurance Company Limited applied under Financial Services and Markets Act 2000 Part VII for sanction of a scheme transferring Southern Rock’s entire insurance business to Alwyn. Both companies were Gibraltar-authorised insurers within the same corporate group and passported into the United Kingdom. Southern Rock was in run-off, with open claims and periodical payment obligations.

The issues were whether the scheme qualified as an insurance business transfer scheme, whether the statutory formalities and certificates had been satisfied, and whether it was appropriate for the court to sanction the scheme.

1. Authorised person and statutory definition. Southern Rock remained an authorised person for the purposes of section 105 of Financial Services and Markets Act 2000. Although the relevant EEA-firm provision in section 31 had been repealed after Brexit, section 409(11)(a) preserved the Gibraltar-related market-access regime, including section 31(1)(b). The saving provisions did not revive the former version of section 105.
2. Section 105 requirements. The scheme satisfied the condition that business carried on in the United Kingdom by an authorised person with permission to effect or carry out insurance contracts was transferred to another body. Whether business was carried on in the United Kingdom depended on the transferor’s actual business activities. The transferred motor-insurance business concerned United Kingdom risks and payments. The business would be carried on from Alwyn’s establishment in Gibraltar, and the scheme was not excluded.
3. Formalities and discretion. The requirements under sections 107 to 110, including notices, regulatory materials and the independent expert report, had been satisfied. The court applied the approach in Re Prudential Assurance Company Limited, including consideration of the nature of the business and the circumstances giving rise to the scheme.
4. Appropriateness of sanction. The paramount concerns were whether the transfer would materially adversely affect Southern Rock’s existing liabilities, the security of Alwyn’s policyholders’ benefits, or customer service standards. The independent expert’s evidence showed no material adverse effect. Alwyn was substantially better capitalised, the businesses were already co-insured, and the same group subsidiary already provided the relevant services. The PRA and FCA did not object.
5. The scheme was sanctioned, with the ancillary orders sought under section 112.