Insurance - application to sanction a scheme
Before : |
R. J. MacRae Esq., Deputy Bailiff, and Jurats Ramsden and Le Cornu |
IN THE MATTER OF A REPRESENTATION OF ZURICH INSURANCE PUBLIC LIMITED COMPANY (FIRST REPRESENTOR) AND ZURICH INSURANCE COMPANY LTD (SECOND REPRESENTOR)
AND IN THE MATTER OF AN APPLICATION PURSUANT TO ARTICLE 27 OF AND SCHEDULE 2 TO THE INSURANCE BUSINESS (JERSEY) LAW 1996
Advocate S. M. Gould for the Representors.
EX TEMPORE judgment
the deputy bailiff:
1. This is an application by the Representors seeking the Court's sanction of a scheme (which we will call the Jersey Scheme) to transfer certain general insurance business carried on in or from Jersey (or in respect of its Jersey policyholders) by Zurich Insurance Public Limited Company (the "Transferor") to Zurich Insurance Company Ltd (the "Transferee") under Article 27 and Schedule 2 of the Insurance Business (Jersey) Law 1996 (the "Law"). The Transferor is an Irish company incorporated in the European Union and the Transferee is a company incorporated in Switzerland and therefore outside the European Union.
2. The proposed transfer (which has been described to us today as an "intragroup transfer of business") mirrors a similar transfer in the United Kingdom pursuant to the Financial Services and Markets Act (the "UK Scheme") which was approved by the English High Court on 3rd November. We have seen the order made by the English High Court today.
3. The transfer proposed pursuant to the Jersey Scheme should become effective simultaneously with the UK Scheme on 1st January 2023. The purpose of the Jersey Scheme and indeed the UK Scheme is to provide a solution so as to allow the Zurich Group, of which the Transferor and Transferee are part, to carry on insurance business in and from the United Kingdom following the United Kingdom's withdrawal from the European Union on 31st January 2020. Following this date, the Transferor has continued to carry on insurance business pursuant to a temporary regime which is short term in nature and expires on 31st December 2023. The Transferor may not continue to operate as a third country branch of an EU entity indefinitely and accordingly it has been decided to obtain the necessary regulatory authorisations both in the UK and Jersey for a UK branch of the Transferee, as Swiss entity as we have said, to receive the majority of the existing policies of the Transferor including all the policies covered by the Jersey Scheme. We have been told that the Transferee, the UK branch of the Swiss company, will operate in the same manner as the UK branch of the Irish company hitherto; the Transferee has offices in the UK and is headquartered in Whitely, Hampshire and will be licensed and regulated in Jersey in the same way that the branch of the Irish company was.
4. This matter first came before this Court on 15th June 2022 when the Court made various orders including requiring that the "Jersey Policyholder Pack," as defined in a Representation, be sent to the Jersey policyholders so that they have and had the opportunity to object to the Jersey Scheme and, if appropriate, attend at the hearing today to make good any such objections. There are some 4526 Jersey policyholders who were notified of the hearing today. None have objected to the Jersey Scheme either in writing or by attending here today. The Jersey policyholders have general insurance such as motor and household policies with the Transferor. None hold long term policies of insurance with the Transferor.
5. We have been told of the 13 objectors who lodged objections in relation to the UK Scheme before it was sanctioned and informed by affidavit sworn on behalf of the Representors of the nature of their objections, the response and observations of the Transferor and Transferee to those objections and we are satisfied that none of those objections are relevant to or materially adverse to the Jersey Scheme.
6. We note that there have been various amendments to the Jersey Scheme since the Representation was issued which mirror changes made to the UK Scheme. These changes have been notified to the Jersey Financial Services Commission, representatives of whom are in Court today, and have also been considered by the Independent Actuary to who we will shortly turn.
The role of the Court
7. The approach of the Court to sanctioning a scheme of this nature was recently considered in Representation of Prudential Assurance Company Limited and Rothsay Life PLC [2022] JRC 001 when Commissioner Clyde-Smith, giving the Judgment of the Court, considered various developments in English case law in the connection of the English Court's discretion to sanction UK Schemes under equivalent legislation and concluded with the following remarks which set out the approach that we also adopt in this case:
"11. In summary, whilst the assessment to be carried out in determining whether or not to sanction a scheme should remain familiar, the particular factors to be considered in each case and the weight afforded to those factors should be determined by reference to the nature of the transferring business and the underlying circumstances of the scheme.
12. The approach taken by the English Court in Re London Life and Re Axa has now evolved in the manner set out by the English Court of Appeal and it is appropriate for this Court to take that into account in its own approach to such transfers, so that it should in the context of this case:
(i) first, identify the nature of the business being transferred and the underlying circumstances giving rise to the Jersey Scheme.
(ii) second, taking the nature of the transferring business and underlying circumstances into account, assess whether:
(a) the transfer will have a material adverse effect on receipt of payments due by relevant parties;
(b) the transfer will have a material adverse effect on service standards; and
(c) any other factors that require further consideration.
(iii) In making its assessment as to material adverse effect, consider:
(a) the Independent Actuary's Report;
(b) the confirmation of no objection from the Jersey Financial Services Commission ("the JFSC");
(c) evidence of any person permitted to be heard in relation to the application to sanction the Jersey Scheme, including any objecting policyholders,
and in making such assessment, the Court should accord full weight to the Independent Actuary's report and non-objection from the JFSC, so that the Court would not depart from them without significant and appropriate reasons for doing so; and
(iv) finally, having undertaken its evaluation of the above, decide whether or not to sanction the Jersey Scheme."
8. In accordance with paragraph 3 of Schedule 2 to the Law, the Representation and Jersey Scheme are accompanied with and have been considered by an Independent Actuary in a report dated 7th June 2022 which, in summary, considers that the policyholders affected by the scheme will not be materially adversely affected by it, and this extends to claims handling policy, general administration of the policies and the provisions in relation to reinsurance. The Independent Actuary had regard to and differentiated between existing policyholders, remaining policyholders and transferring policyholders. Existing policyholders are policyholders of the Transferee, the Swiss entity. Remaining policyholders are the non-transferring policyholders of the Transferor, the Irish entity, which includes policyholders holding policies with risks situated in the EEA and all the policyholders of the non-UK branches of the Transferor. Finally transferring policyholders are those policyholders transferring from the Transferor to the Transferee and will make up most or all of the Jersey policyholders to whom we have already referred. None of those different groups of policyholders, to be clear, are in the opinion of the Independent Actuary to be materially adversely affected by the terms of the Jersey Scheme. A supplementary report from the Independent Actuary dated 25th October 2022 says that her conclusions have not changed in the light of updated financial information and any material events that have occurred since June 2022 (when she produced her first report).
9. The JFSC has indicated that it has no objection to the Jersey Scheme. We have already mentioned the position of Jersey policyholders. Correspondence between Counsel for the Representors and the Jersey Comptroller of Taxes and correspondence received from Zurich UK indicates that there will be no Jersey or UK taxation implications for Jersey policyholders arising from implementation of the Jersey Scheme or indeed the UK Scheme.
10. Further the procedural requirements set out under Article 27 and paragraph 1 of the Schedule to the Law have been met.
Decision
11. Applying the test recently adopted by the Royal Court, we have already noted the nature of the business, namely general insurance business, being transferred by way of an intragroup transfer and the circumstances giving rise to the Jersey Scheme namely the need for certain arrangements to be made consequent upon the UK's withdrawal from the European Union.
12. The Independent Actuary has concluded that the various groups of policyholders will not be materially adversely affected by the Jersey Scheme and the equivalent UK Scheme. We accept, as suggested by the Representor, that there may be a material adverse impact on continuity for policyholders if the Jersey scheme is not sanctioned as the Transferor must find a solution in relatively short order to carrying on business in and from the UK following the UK's departure from the European Union. The JFSC has considered the Jersey Scheme and does not object to it and no policyholders have objected either.
13. Having evaluated all the relevant considerations we have decided to sanction the Jersey Scheme and accordingly make Orders in terms of the Draft supplied to us for our consideration. We make the order proposed subject to small changes which we have supplied to Counsel.
Authorities
Insurance Business (Jersey) Law 1996.
Representation of Prudential Assurance Company Limited and Rothsay Life PLC [2022] JRC 001.