Jersey Unreported Judgments

Insurance - application seeking sanction of the Court to transfer business in relation to the Insurance Business (Jersey) Law 1996.

[2015]JRC263

Royal Court

(Samedi)

18 December 2015

IN THE MATTER OF THE REPRESENTATION OF STERLING INSURANCE COMPANY LIMITED AND COVEA INSURANCE PLC

AND IN THE MATTER OF AN APPLICATION PURSUANT TO ARTICLE 27 OF AND SCHEDULE 2 TO THE INSURANCE (JERSEY) Law 1996

Advocate S. M. Huelin for the Representors.

judgment

the commissioner:

1.        This is an application by the representors seeking the sanction of the Court to a scheme ("the Jersey Scheme") to transfer the whole of the general insurance business carried on in or from within Jersey by the First Representor ("Sterling") to the Second Representor ("Covea") under Article 27 of and Schedule 2 to the Insurance Business (Jersey) Law 1996 ("the Insurance Law"). 

2.        Each of the representors is an authorised person with permission to effect and carry out contracts of insurance (as authorised by the Financial Conduct Authority) in the United Kingdom.  Accordingly, a separate scheme is proposed in the United Kingdom ("the UK Scheme") in respect of the transfer of the whole of the general insurance business from Sterling to Covea. 

3.        The representors are part of the same corporate group and the Jersey scheme is part of a proposed reorganisation of the general insurance business of the Covea group companies. 

4.        Covea is a UK insurance company wholly owned by the Covea Group through its UK holding MNA Holdings UK PLC.  Covea writes motor, household and commercial lines business, all of which is distributed entirely through brokers and intermediaries. 

5.        Sterling is a UK insurance company also wholly owned by the Covea Group writing policies to businesses, the general public and mid to high net-worth individuals.  It is mainly focused on UK creditor, household and commercial insurance with a small amount of personal accident business. 

6.        Sterling is considered to have an adequate financially stable outlook by market observers - by way of example, it held a "BBB +" credit rating from Fitch Ratings before the acquisition by the Covea Group. 

7.        While the Covea Group is based in France it operates in Europe (with a small amount of policies in US and Canada) through a network of branches and subsidiaries including, in the UK, the representors.  The Covea Group and Covea hold an "A" credit rating by Standard and Poor's. 

8.        The proposed transfer constitutes an internal reorganisation of the UK subsidiaries of the Covea Group, thereby enabling them more effective management of capital following the introduction of the new prudential regulatory regime known as Solvency II.  It will consolidate Covea Groups' presence in the UK non-life market into one main vehicle.

9.        It is intended that the proposed transfer pursuant to the Jersey Scheme should become effective simultaneously with the UK Scheme becoming effective, which is currently set for 23:39 GMT on 31^st December, 2015. 

Procedural Requirements

10.      In accordance with Article 27 and paragraph 1 of Schedule 2 to the Insurance Law, Sterling is duly authorised by the Jersey Financial Services Commission to carry on general insurance business. 

11.      In accordance with paragraph 3 of Schedule 2 to the Insurance Law, the representation and the Jersey Scheme document are accompanied by a report of an independent actuary, Philip Tippin, ("the Independent Actuary"), a fellow of the Institute and Faculty of Actuaries, dated 12^th August, 2015, ("the Independent Actuary's Report") on the terms of, inter alia, the Jersey Scheme. 

12.      Paragraph 4 of Schedule 2 of the Insurance Law sets out certain procedural requirements in relation to an insurance transfer scheme which we are satisfied from the second affidavit of Steven Whittaker have been met. 

13.      In accordance with paragraph 5 of Schedule 2 to the Insurance Law, copies of the documents have been available by making a request for the same at the officers of Mourant Ozannes in Jersey.

14.      For the purpose of paragraph 7 of Schedule 2 to the Insurance Law, Covea is authorised by the Jersey Financial Services Commission to carry on general insurance business for the purpose of receiving the Transferring Jersey Business (as defined in the Jersey Scheme) from Sterling. 

Merits of the Jersey Scheme

15.      Under the Jersey Scheme Sterling wishes to transfer the whole of its general insurance business carried on in or from within Jersey to Covea.  The provisions of the Jersey Scheme will become effective once the sanction of the Court has been obtained and the UK Scheme has become effective. 

16.      No-one has appeared today to object to the Jersey Scheme.  To the date of the second affidavit of Steven Whittaker, the representors have not received any objections to the Jersey Scheme and Advocate Huelin has confirmed to us today that no objections have been received since that date. 

17.      In the Independent Actuary's Report, the Independent Actuary make his conclusions at page 70 and states that:-

"I have considered the Transfer and its likely effect on each of the policyholder groups.  I have concluded that the risk of any policyholder being adversely affected by the proposed transfer is sufficiently remote for it to be appropriate to proceed with the proposed transfer as described in this report."

18.      The Jersey Financial Services Commission has been advised of the Jersey Scheme and has confirmed that it does not have any objections or specific comments to make concerning the provisions of the Jersey Scheme.  That has been confirmed to us again today by representatives of the Jersey Financial Services Commission who are present in Court.

Supplementary Report to the Independent Actuary's Report

19.      The Independent Actuary prepared a supplementary report to the Independent Actuary's Report ("the Supplementary Report") in connection with the UK Scheme and the Jersey Scheme for the representors with the intent that it shall also be made available to the regulators and the court in each relevant jurisdiction, but not sent to the policyholders or members of the representors.

20.      In the Supplementary Report the Independent Actuary confirms that having considered certain updated information, the overall conclusions that he reached in the Independent Actuary's Report remain unchanged and that he has not identified any material adverse effect on any group of policyholders as a result of the proposed transfer of business (and on page 4 he confirms that his conclusions apply equally to the Jersey Scheme).

Tax Implications

21.      Correspondence between Mourant Ozannes and the Jersey Comptroller of Taxes, exhibited to the second affidavit of Steven Whittaker confirms that no implications arise for Jersey policyholders in relation to Jersey tax as a result of the Jersey Scheme.

22.      Paragraph 117 of the second affidavit of Steven Whittaker confirms that the UK tax treatment of Jersey resident policyholders will not change as a result of the transfer of policies from the Sterling to Covea. 

Order of the High Court of England and Wales

23.      The High Court of Justice of England and Wales sanctioned the UK Scheme on 11^th December, 2015.

Discretion of the Court to sanction the Jersey Scheme

24.      In determining whether there are any particular matters which the Court ought to have in mind in deciding whether or not to sanction the Jersey Scheme, we have been referred to the well-known judgment of Hoffman J in Re London Life Association Limited (unreported), in relation to the Scheme under Section 49 of the Insurance Companies Act 1982 which was in similar terms to Schedule 2 to the Insurance Law.

25.      The Bailiff applied the judgment in Re London Life Association Limited in deciding to grant an application for sanction of a transfer scheme pursuant to Schedule 2 to the Insurance Law in The Norwich Union Life Society-v-Norwich Union Annuity Limited & Ors (25^th April 1997) (Jersey Unrep 81/97.

Conclusion

26.      Applying those principles and in the light of the foregoing we hereby sanction the Jersey Scheme by making an order in the terms of the draft order supplied. 

Authorities

Insurance Business (Jersey) Law 1996.

Re London Life Association Limited (unreported).

Insurance Companies Act 1982.

The Norwich Union Life Society-v-Norwich Union Annuity Limited & Ors (25th April 1997) (Jersey Unrep 81/97.