The following Restructuring & Insolvency guidance note Produced in partnership with Geraldine Quirk of Bryan Cave Leighton Paisner LLP provides comprehensive and up to date legal information covering:
Consistent with the common law of contract, an insurer is not able to transfer the burden of its obligations under a contract of insurance without the consent of the policyholder. A novation agreement between the original insurer, the policyholder and the substitute insurer is, as a general rule, required to effect such a transfer.
As an exception to this rule, an insurance business transfer scheme under Part VII of the Financial Services and Markets Act 2000 (FSMA 2000) provides a process by which an insurer may transfer the whole or part of its business, subject to certain conditions, without obtaining the consent of individual policyholders.
The UK has had a regime for transferring portfolios of business for some time. Earlier procedures under the Insurance Companies Act 1982 differed in the case of long-term insurance (essentially life, annuity, permanent health and pension business) and general insurance business. In the former case, a court application was required, whereas for general insurance, only the approval of the regulator was needed. In either case, a difficulty with the process was that outwards reinsurance protecting the business to be transferred could not be included within the transfer, and had to be individually and contemporaneously novated. This was often a bar to the process being used at all.
However, the Part VII process allows for the transfer of outwards reinsurance,
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