Insurance Business Transfer

Please read this text as a general guide to Insurance Business Transfers. Details of the Ensign Insurance Business Transfer can be found by following the link on the right hand navigation bar.

What is an Insurance Business Transfer?

When Insurance companies in Europe transfer business between separate companies they are governed by the European Insurance Directive which imposes certain responsibilities on the companies making the transfer.  In the UK the legislation which manages these transfers is the Financial Services and Markets Act 2000 (FSMA), which acts in concert with the European Insurance Directive.

Insurance companies can transfer whole companies, books of business or certain blocks of policies.

The transfer of insurance business is tightly controlled, through FSMA, by the High Court and the Financial Services Authority (FSA).  This tight control is imposed in part because the interests of policyholders are deemed to be paramount.

FSMA requires a number of key activities to take place before a business is approved for transfer.

Scheme

What is the Scheme?

The process of transferring the business is known as the Scheme. This is a legal process which must get approval from the High Court.

To reach its decision the High Court will follow a process which involves close consultation with the FSA and a report by an Independent Expert which states that the transfer is fair to all classes of policyholders.

Independent Expert’s Report

An actuary, experienced in Insurance business, is appointed and his appointment approved by the FSA.  His role is to write an independent report which will consider the implications of the Scheme and in particular its effect on the affected policyholders (transferring and non-transferring).  In order for the Scheme to be approved the Independent Expert must conclude that policyholders are not adversely materially affected.

Policyholder Mailing

A requirement of FSMA is that affected policyholders are sent a letter (and possibly a pack) explaining what is happening, when, and what they can do about it.  Policyholders are entitled to 6 weeks notice of the intended transfer.

Policyholders are also entitled to object to the transfer if they feel they are adversely affected.

Policyholders can object in person, be represented or have their objection put before the High Court.

When will policies transfer? What is the Effective date?

If the High Court gives permission the transfer of business will happen on a date agreed by the parties to the Scheme. This is known as the Effective Date.