IRB-Brasil Resseguros S.A., Re

On an application to sanction a Part VII insurance business transfer under the Financial Services and Markets Act 2000, the court must identify the nature and context of the business and assess whether the scheme has any material adverse effect on policyholders or other affected stakeholders. For general insurance, the central concerns are the security of valid claims, service standards and corporate governance. Materiality requires a real or significant risk, rather than a fanciful or insignificant one.

The court must scrutinise the independent expert’s and regulators’ reports, give them full weight where clear and cogent, and avoid substituting its own specialist assessment. It need not find the scheme beneficial or the best available scheme. Where the statutory requirements are met and sanction is appropriate in all the circumstances, the court may sanction the scheme, leaving its detailed terms to the directors.

IRB-Brasil Resseguros S.A. and Community Reinsurance Corporation Limited sought an order under Part VII of the Financial Services and Markets Act 2000 sanctioning the transfer of IRB’s UK-branch run-off reinsurance business to Community Re.

The transferring business comprised historic marine, aviation, property and casualty reinsurance, with policies governed mainly by US law. The Independent Expert concluded that policyholders and transferring reinsurers would not be materially adversely affected. TIG Insurance Company objected over reserves, capital and service standards but withdrew its objection after further evidence and discussions. The central issue was whether the statutory requirements were met and whether the Scheme should be sanctioned.

1. Disposition and statutory compliance. The court sanctioned the Scheme under Part VII of the Financial Services and Markets Act 2000 and made ancillary orders. It was satisfied that the transferee had the necessary authorisation and that the appropriate Schedule 12 certificate had been obtained. A relatively small degree of non-compliance with the directions was waived.

2. Applicable approach. The guidance in Re London Life Association Ltd 21 February 1989 (Unreported) and Re Axa Equity & Law Life Assurance Society plc and Axa Sun Life plc [2001] 1 All ER (Comm) 1010 required adaptation for general insurance and was not a universal checklist. Re Royal Sun Alliance Insurance plc [2008] EWHC 3436 (Ch) confirmed the importance of service standards and real, rather than fanciful, risks. The court applied the guidance in Re The Prudential Assurance Company Limited [2020] EWCA Civ 1626: identify the business and context, scrutinise the Independent Expert’s and regulators’ reports, give them full weight absent material defects, and assess any material adverse effect on security, service standards and governance. The court need not select the best scheme or require changes to its detailed terms.

3. Application. The reports of the Independent Expert, the PRA and the FCA were clear, cogent and convincing. They supported the conclusion that the transfer would not materially adversely affect policyholders, employees or other stakeholders, and that service standards and corporate governance would not be adversely affected. The concerns raised by TIG had been addressed and its objection had been withdrawn. Following Mercantile Indemnity Company Limited [2025] EWHC 3396 (Ch), it was unnecessary to show that the transfer would benefit affected policyholders; the relevant question was material adverse effect.

4. Order. Having considered all the material and exercised the discretion under section 111(3), the court was entirely satisfied that sanction was appropriate. The Scheme was sanctioned, with ancillary orders under section 112.