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Part XXIVU.K. Insolvency

Modifications etc. (not altering text)

C1Pt. 24 applied (with modifications) (8.12.2017) by The Risk Transformation Regulations 2017 (S.I. 2017/1212), regs. 1(2), 166(2), 167(2), Sch. 2, Sch. 3 (with regs. 168, 189)

C2Pt. 24 applied in part (with modifications) (8.7.2021) by S.I. 2017/752, Sch. 6 para. 9 (as substituted by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 48(1))

C3Pt. 24 applied in part (with modifications) (8.7.2021) by S.I. 2011/99, Sch. 3 para. 7 (as substituted by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 48(2))

Supplemental provisions concerning insurersU.K.

376 Continuation of contracts of long-term insurance where insurer in liquidation.U.K.

(1)This section applies in relation to the winding up of an insurer which effects or carries out contracts of long-term insurance.

(2)Unless the court otherwise orders, the liquidator must carry on the insurer’s business so far as it consists of carrying out the insurer’s contracts of long-term insurance with a view to its being transferred as a going concern to a person who may lawfully carry out those contracts.

(3)In carrying on the business, the liquidator—

(a)may agree to the variation of any contracts of insurance in existence when the winding up order is made; but

(b)must not effect any new contracts of insurance.

(4)If the liquidator is satisfied that the interests of the creditors in respect of liabilities of the insurer attributable to contracts of long-term insurance effected by it require the appointment of a special manager, he may apply to the court.

(5)On such an application, the court may appoint a special manager to act during such time as the court may direct.

(6)The special manager is to have such powers, including any of the powers of a receiver or manager, as the court may direct.

(7)Section 177(5) of the 1986 Act (or Article 151(5) of the 1989 Order) applies to a special manager appointed under subsection (5) as it applies to a special manager appointed under section 177 of the 1986 Act (or Article 151 of the 1989 Order).

(8)If the court thinks fit, it may reduce the value of one or more of the contracts of long-term insurance effected by the insurer.

(9)Any reduction is to be on such terms and subject to such conditions (if any) as the court thinks fit.

(10)The court may, on the application of an official, appoint an independent actuary to investigate the insurer’s business so far as it consists of carrying out its contracts of long-term insurance and to report to the official—

(a)on the desirability or otherwise of that part of the insurer’s business being continued; and

(b)on any reduction in the contracts of long-term insurance effected by the insurer that may be necessary for successful continuation of that part of the insurer’s business.

(11)“Official” means—

(a)the liquidator;

(b)a special manager appointed under subsection (5); or

(c)the [F1PRA].

[F2(11A)The PRA must—

(a)consult the FCA before making an application under subsection (10), and

(b)provide the FCA with a copy of any actuary's report made to the PRA under that subsection.

(11B)In the event that the activity of effecting or carrying out long-term contracts of insurance as principal is not to any extent a [F3PRA-regulated] activity—

(a)the reference in subsection (11)(c) to the PRA is to be read as a reference to the FCA, and

(b)subsection (11A) does not apply.]

(12)The liquidator may make an application in the name of the insurer and on its behalf under Part VII without obtaining the permission that would otherwise be required by [F4Article 142 of, and Schedule 2 to, the 1989 Order.]

Textual Amendments

F1Word in s. 376(11)(c) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 14 para. 24(2) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

F5377 Reducing the value of contracts instead of winding up.U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

[F6377AWrite-down ordersU.K.

(1)A “write-down order” is an order of the court directing that the value of one or more of an insurer’s liabilities is reduced on such terms as may be specified in the order.

(2)The court may make a write-down order in relation to an insurer if it is satisfied that—

(a)the insurer is, or is likely to become, unable to pay its debts (within the meaning given to that expression by section 123 of the 1986 Act or Article 103 of the 1989 Order), and

(b)making the order is reasonably likely to lead to a better outcome for the insurer’s policyholders and other creditors (taken as a whole) than not making the order.

(3)A write-down order—

(a)takes effect on the later of—

(i)the date specified in the order, and

(ii)the date on which the appointment of a person to act as the manager of the order first takes effect (see section 377G(7));

(b)ceases to have effect in accordance with section 377H;

(c)may be revoked or varied in accordance with section 377I.

(4)A write-down order may not be made in relation to an insurer—

(a)which is in administration (within the meaning of Schedule B1 to the 1986 Act or Schedule B1 to the 1989 Order), or

(b)which is in liquidation by virtue of—

(i)a resolution for voluntary winding up, or

(ii)a winding-up order under section 125 of the 1986 Act or Article 105 of the 1989 Order.

(5)A write-down order may not reduce the value of an excluded liability (within the meaning given by section 377B).

(6)A liability, to the extent of its reduction by a write-down order under this section, is to be treated as extinguished unless and until revived by section 377H or 377I.

(7)In this section, “creditor” includes a contingent or prospective creditor.]

Textual Amendments

[F6377BExcluded liabilitiesU.K.

(1)Each of the following is an “excluded liability”—

(a)a liability with an original maturity of less than 7 days;

(b)an amount payable in respect of goods delivered, or a service provided, on or after the date on which the write-down order is made;

(c)an amount in respect of remuneration or expenses of a person appointed under section 377G to act as the manager of the write-down order (including amounts incurred before, as well as after, the person’s appointment in connection with the order or the application for the order);

(d)an amount secured on property of any kind, other than an amount secured by a charge which, as created, was a floating charge;

(e)an amount payable in respect of wages or salary arising under a contract of employment;

(f)a contribution or other sum payable in respect of an occupational pension scheme;

(g)an amount payable in respect of redundancy payments;

(h)an amount payable under a contract or other instrument involving financial services.

(2)In this section—

Textual Amendments

[F6377CApplication for a write-down orderU.K.

(1)An application to the court for a write-down order in relation to an insurer may be made only by—

(a)the Treasury;

(b)the PRA;

(c)the insurer;

(d)a shareholder of the insurer;

(e)a policyholder or other creditor (including a contingent or prospective creditor) of the insurer.

(2)An application for a write-down order may not be withdrawn without the permission of the court.

(3)A person other than the PRA or the Treasury—

(a)must obtain the consent of the PRA before making an application for a write-down order;

(b)must notify the PRA before seeking the court’s permission to withdraw an application for a write-down order.

(4)Consent under subsection (3)—

(a)must be in writing, and

(b)must be filed with the court with the relevant application.

(5)The PRA must consult the FCA before—

(a)making an application for a write-down order, or

(b)giving or refusing consent for a person to make an application for a write-down order.]

Textual Amendments

[F6377DPowers of the FCA and PRA to participate in proceedingsU.K.

(1)This section applies if an application is made to the court for a write-down order.

(2)The FCA and the PRA are entitled to be heard—

(a)at any hearing relating to the application, and

(b)if an order is made, at any hearing relating to the order.

(3)Any notice or other document required to be sent to a creditor of the insurer—

(a)in relation to the application, or

(b)if an order is made, in relation to the order,

must also be sent to the FCA and the PRA.]

Textual Amendments

[F6377EPowers of the courtU.K.

On an application for a write-down order, the court may—

(a)if, on hearing the application, it is satisfied of the matters in section 377A(2), make a write-down order in the terms sought, or in such other terms as the court thinks appropriate;

(b)dismiss the application;

(c)adjourn the hearing conditionally or unconditionally;

(d)make any other order which the court thinks appropriate.]

Textual Amendments

[F6377FDuty to notify creditorsU.K.

(1)This section applies where a write-down order is made in relation to an insurer.

(2)As soon as reasonably practicable after the order is made, the insurer must notify the FCA, the PRA and each affected person that the order has been made.

(3)An “affected person” is a person of a description specified in rules made by the PRA for the purposes of this section.

(4)Notification under this section—

(a)must include such other information as may be specified in rules made by the PRA for the purposes of this section, and

(b)must be given in such form and manner as may be specified in rules made by the PRA for the purposes of this section.

(5)Failure to notify an affected person in accordance with this section, or rules made by the PRA for the purposes of this section, does not affect the validity of the write-down order in relation to that person or any other person.]

Textual Amendments

[F6377GThe managerU.K.

(1)The court may by order appoint one or more eligible persons to act as the manager of a write-down order (“the manager”).

(2)An order under subsection (1) may—

(a)be made at the same time as the write-down order or at a later date (but see section 377A(3)(a));

(b)appoint a person in addition to or instead of a person who is for the time being appointed;

(c)give such directions about the carrying out of the person’s functions as the manager as the court thinks appropriate.

(3)The court may by order terminate the appointment of a person who is for the time being appointed to act as the manager of a write-down order.

(4)Sections 377C and 377D apply to an application to the court for an order under subsection (1) or (3) as they apply to an application for a write-down order but—

(a)if the application is for the appointment of a person in addition to, or instead of, a person for the time being appointed, section 377C(1) applies as if the persons mentioned included a person for the time being appointed;

(b)section 377C(2) does not apply.

(5)The court may appoint a person to act as the manager of a write-down order only if—

(a)the PRA has provided the court with a statement that the person is suitably qualified, and

(b)the person has provided the court with a statement that the person consents so to act.

(6)Where it is proposed that more than one person should act as the manager, the statement under subsection (5)(b) must specify—

(a)which of the functions of the manager (if any) are to be exercised by the persons acting jointly, and

(b)which of the functions of the manager (if any) are to be exercised by any or all of the persons.

(7)The appointment of a person to act as the manager—

(a)takes effect at the time specified in the order by which the person is appointed, and

(b)ceases to have effect at the time specified in the order by which the person’s appointment is terminated (whether by being replaced by another person or otherwise).

(8)Schedule 19A makes further provision about the manager of a write-down order.]

Textual Amendments

[F6377HWrite-down order ceasing to have effectU.K.

(1)A reduction in the value of a liability of an insurer under a write-down order ceases to have effect—

(a)on such date as may be specified in the order (and different dates may be specified in relation to different liabilities or liabilities of different types), or

(b)if earlier, or if no such date is specified, the date on which a termination event happens (or, if more than one termination event happens, the earliest of those dates).

(2)In the following table—

(a)the first column specifies each event which is a termination event for the purposes of this section, and

(b)the second column specifies, in relation to each termination event, the date on which the event happens for the purposes of this section.

EventDate event happens

The write-down order being—

(a)

revoked, or

(b)

varied so as to remove the liability in question from its scope,

by an order under section 377I

(a)

The date specified in the order under section 377I as the date on which the revocation or variation is to take effect, or

(b)

if no date is specified, the date on which the order under section 377I is made

The insurer ceasing to have permission under Part 4A to carry out contracts of insuranceThe date on which the withdrawal of permission takes effect
The transfer of the liability in question pursuant to an insurance business transfer scheme which has effect in accordance with an order under section 111(1)The date on which the transfer takes effect
The making of a winding-up order against the insurerThe date on which the order is made
The voluntary winding up of the insurerThe date on which the liquidator is appointed
The coming into force of a voluntary arrangement (under Part 1 of the 1986 Act or Part 2 of the 1989 Order) in relation to the insurerThe date on which the voluntary arrangement comes into force
The insurer entering administrationThe date on which the appointment of an administrator takes effect.

(3)Where a write-down order is varied, this section applies as if references to the write-down order were to the order as varied.]

Textual Amendments

[F6377IVariation or revocation of a write-down orderU.K.

(1)The court may, by order—

(a)revoke a write-down order, or

(b)vary (or further vary) a write-down order.

(2)Section 377A(2)(b) applies to the making of an order under this section as it applies to the making of the write-down order.

(3)In varying (or further varying) a write-down order the court may, in particular—

(a)remove one or more of the insurer’s liabilities from the scope of the order (but removing all such liabilities from the scope of the order takes effect as a termination of the order);

(b)bring one or more of the insurer’s liabilities within the scope of the order (on such terms as the court may specify);

(c)further reduce the value of one or more of the insurer’s liabilities;

(d)increase the value of one or more of the insurer’s liabilities to any amount less than the value the liability had before the write-down order took effect;

(e)vary any term specified in the order, including the period for which a reduction in the value of a liability has effect;

(f)make any other order that the court thinks appropriate.

(4)Sections 377C to 377F apply to an application for an order under this section as they apply to an application for a write-down order but with the following modifications—

(a)section 377C(1) applies as if the list of persons entitled to make an application included—

(i)the FCA;

(ii)the scheme manager of the Financial Services Compensation Scheme (see section 212(1));

(iii)a person appointed under section 377G to act as the manager of the write-down order;

(b)if the person making the application is the scheme manager of the Financial Services Compensation Scheme, section 377C(3) does not apply.

(5)The scheme manager of the Financial Services Compensation Scheme must consult the FCA and the PRA before making an application to vary or revoke a write-down order.

(6)Where a provisional liquidator of the insurer has been appointed under section 135 of the 1986 Act or Article 115 of the 1989 Order, a person appointed to act as the manager of a write-down order must obtain the consent of the provisional liquidator before making an application for an order under this section.]

Textual Amendments

[F6377JFurther provision about write-down ordersU.K.

In Schedule 19B—

(a)Part 1 makes provision about the enforcement of a liability of an insurer while a write-down order has effect;

(b)Part 2 makes provision about the disposal of an insurer’s assets and the making of certain payments by an insurer while a write-down order has effect;

(c)Part 3 makes provision about the treatment of an insurer’s liabilities for the purposes of certain provisions relating to insolvency while a write-down order has effect;

(d)Part 4 makes provision about interest payable in respect of liabilities reduced under a write-down order or prevented from being enforced while a write-down order has effect.]

Textual Amendments

[F7377KInsurers in financial difficulties: enforcement of contractsU.K.

Schedule 19C makes provision about the enforcement of certain contracts to which an insurer is a party while the insurer is in financial difficulties (within the meaning given by the Schedule).]

Textual Amendments

378 Treatment of assets on winding up.U.K.

(1)The Treasury may by regulations provide for the treatment of the assets of an insurer on its winding up.

(2)The regulations may, in particular, provide for—

(a)assets representing a particular part of the insurer’s business to be available only for meeting liabilities attributable to that part of the insurer’s business;

(b)separate general meetings of the creditors to be held in respect of liabilities attributable to a particular part of the insurer’s business.

379 Winding-up rules.U.K.

(1)Winding-up rules may include provision—

(a)for determining the amount of the liabilities of an insurer to policyholders of any class or description for the purpose of proof in a winding up; and

(b)generally for carrying into effect the provisions of this Part with respect to the winding up of insurers.

(2)Winding-up rules may, in particular, make provision for all or any of the following matters—

(a)the identification of assets and liabilities;

(b)the apportionment, between assets of different classes or descriptions, of—

(i)the costs, charges and expenses of the winding up; and

(ii)any debts of the insurer of a specified class or description;

(c)the determination of the amount of liabilities of a specified description;

(d)the application of assets for meeting liabilities of a specified description;

(e)the application of assets representing any excess of a specified description.

(3)“Specified” means specified in winding-up rules.

(4)“Winding-up rules” means rules made under section 411 of the 1986 Act (or Article 359 of the 1989 Order).

(5)Nothing in this section affects the power to make winding-up rules under the 1986 Act or the 1989 Order.