Jersey Unreported Judgments

Insurance - sanction of a scheme.

[2023]JRC208

Royal Court

(Samedi)

17 October 2023

IN THE MATTER OF THE REPRESENTATION OF PHOENIX LIFE ASSURANCE LIMITED

AND STANDARD LIFE ASSURANCE LIMITED

AND PHOENIX LIFE LIMITED

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.

exTempore judgment

in private

the Commissioner:

1.        This is an application by the Representors Phoenix Life Assurance Limited, Standard Life Assurance Limited and Phoenix Life Limited pursuant to Article 27 and Schedule 2 of the Insurance Business (Jersey) Law 1996 ("1996" Law") seeking the sanction of a scheme for the transfer to Phoenix Life Limited of the whole of the long term insurance business carried on in and from within Jersey by Phoenix Life Assurance Limited and Standard Life Assurance Limited.

2.        The Jersey Scheme is associated with a similar transfer scheme in the United Kingdom which was sanctioned by the High Court of England and Wales on 10^th October 2023.

3.        The stated purpose of the Jersey Scheme and the UK Scheme is to rationalise the number of life companies within the Phoenix Group.  The aim being to achieve long-term capital operational and administrative efficiencies to allow a consistent approach to financial management across the combined businesses and to facilitate future management actions thereby building further resilience.

4.        Schedule 2 to the 1996 Law imposes a number of procedural requirements that have to be satisfied before the Court can sanction a scheme.  These requirements are in summary:

(i)        The publication of a notice in the Jersey Gazette giving notice of the application and of the address at which relevant documents can be inspected.

(ii)       The sending to the relevant policy holders and members of the companies concerned a statement of the terms of the scheme and a summary of an independent actuarial opinion on the likely effects of the scheme on the policy holders.

(iii)      The service upon the JFSC of a copy of the representation, the actuarial report and the statement sent to policy holders not less than 21 days before the Court hearing.

5.        In relation to the second requirements the Royal Court directed on 15 May 2023 that the parties to the Jersey Scheme might dispense with the sending of a summary of the actuarial report and statement of the terms of the Jersey Scheme to each policy holder and member and instead use reasonable endeavours to send a mailing pack as defined in the Representation to the relevant policy holders.

6.        We note that copies of the Representation, the independent actuarial report and the documents sent to relevant policy holders were open to inspection at the office of Mourant Ozannes for a period of not less than 21 days from 15 May 2023, and during that time only one policy holder visited the offices to view the documents, that policy holder not wishing to take or keep copies of the documents.

7.        We further note that no objections have been made by policy holders to the Jersey Scheme.  Having reviewed the supporting affidavits evidence we are satisfied that the procedural requirements to which we have referred have been satisfied.

8.        In addition, it is clear from an exchange of correspondence between the Representors' Jersey Lawyers and the Jersey Comptroller of Taxes that no implications arise for Jersey policy holders in relation to Jersey tax as a result of the Jersey Scheme.  

9.        There is a further requirement of Schedule 2 of the 1996 Law, that the Representation and the Jersey Scheme are accompanied by a report of an independent actuary of which we have already made mention.  The report of the independent actuary Mr John Jenkins and his supplementary report and addenda concludes that the implementation of the scheme will not have a material adverse effect on any of:

(i)        The reasonable benefit expectations of the policy holders of the Representors.

(ii)       The security of the benefits of the policy holders of the Representors.

(iii)      The levels of administration, customer service and governance that apply to the policy holders of the Representors. 

10.      At this point we should mention that the Jersey Scheme is a consolidating scheme, and it will supersede each of seven existing schemes which were approved by the Court between 2006 and 2018 referred to as the "Superseded Schemes".  Accordingly, the Representors additionally seek the Courts approval to replace these schemes with the Jersey Scheme.

11.      We accept that this falls within our powers under the 1996 Law, paragraph 9 (e) of Schedule 2 of which provides that:

"Where the Court makes an order under [Schedule 2] sanctioning a scheme, the Court may, either by that order or by any subsequent order, make provision for... such incidental, consequential and supplementary matters as are necessary to secure that the scheme shall be fully and effectively carried out." 

12.      Amendments to the Superseded schemes require certain procedural formalities.  One of which is the provision of a certificate from an independent actuary to the effect that the proposed amendments will not affect the reasonable expectations and in some cases the security of the holders of the relevant policies.  In that connection we note that the appropriate certificates have been provided by Mr Jenkins in his report.

13.      Notwithstanding the satisfaction of the procedural requirements under Schedule 2 of the 1996 Law the Court nevertheless, retains a discretion as to whether or not to approve a scheme.  The relevant considerations to be taken into account in deciding whether to sanction a scheme have at times been the subject of some judicial discussion in the English Courts.  In particular in two decisions of the High Court of England and Wales in 1989 and 2001 namely, Re London Life Association Limited 21 February 1989 (unreported) and Re Axa Equity and Law Life Assurance Society plc and Axa Sun Life plc [2001] 2 BCLC 447.  The issue was clarified by a decision of the English Court of Appeal in Prudential Assurance Company Limited and Rothesay Life PLC [2020] EWCA Civ 1626. 

14.      In a decision of Commissioner Clyde-Smith in Representation of the Prudential Assurance Company Limited and Rothesay Life PLC [2022] JRC 001, which referred to the English Court of Appeal decision the learned Commissioner noted that notwithstanding a previous debate the overarching assessment as to whether the scheme has any material adverse effect remains.  The Commissioner went on to say:

"The approach taken by the English Court in Re London Life and Re Axa has now evolved in the manner set out in 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."

15.      We have already noted that all of the procedural requirements have been met, that the favourable conclusions of the independent actuary and we have noted the non-objection by the JFSC.  Furthermore, as we have also noted it was agreed that no Jersey tax implications arose.  There were no objections to the Jersey Scheme before us and indeed only one policy holder had gone so far as to review the documents that were open to inspection.

16.      It is clear that the stated purposes of the Jersey Scheme including the rationalisation of the number of life companies within the Phoenix Group may well be of benefit to policy holders rather than having any adverse impact upon them. 

17.      In the light of the above and taking note also of the recent sanction of the UK Scheme by the High Court we sanction the Jersey Scheme, approve the amendment of the Superseded Schemes, and make the orders set out in the draft as submitted by counsel.  

Authorities

Insurance Business (Jersey) Law 1996.

Re London Life Association Limited 21 February 1989 (unreported)

Re Axa Equity and Law Life Assurance Society Plc and Axa Sun Life Plc [2001] 2 BCLC 447. 

Prudential Assurance Company Limited and Rothesay Life PLC [2020] EWCA Civ 1626. 

Representation of the Prudential Assurance Company Limited and Rothesay Life PLC [2022] JRC 001