Financial Services and Markets Act 2000

[F1 PART 3 U.K. Termination etc of relevant contracts

Textual Amendments

F1 Sch. 19C inserted (29.8.2023) by Financial Services and Markets Act 2023 (c. 29), s. 86(2)(e), Sch. 13 para. 1(3)

Relevant contracts U.K.

6 (1) For the purposes of this Part of this Schedule, a contract to which an insurer is a party is a “relevant contract” if it is—

(a) a contract for the supply of goods or services to the insurer,

(b) a financial contract, or

(c) a reinsurance contract under which contracts of insurance the insurer carries out as principal are reinsured.

(2) “Financial contract” means—

(a) a contract for the provision of financial services consisting of—

(i) lending (including the factoring and financing of commercial transactions),

(ii) financial leasing, or

(iii) providing guarantees or commitments;

(b) a securities contract, including—

(i) a contract for the purchase, sale or loan of a security or group or index of securities;

(ii) an option on a security or group or index of securities;

(iii) a repurchase or reverse repurchase transaction on any such security, group or index;

(c) a commodities contract, including—

(i) a contract for the purchase, sale or loan of a commodity or group or index of commodities for future delivery;

(ii) an option on a commodity or group or index of commodities;

(iii) a repurchase or reverse repurchase transaction on any such commodity, group or index;

(d) a futures or forwards contract, including a contract (other than a commodities contract) for the purchase, sale or transfer of a commodity or property of any other description, service, right or interest for a specified price at a future date;

(e) a swap agreement, including—

(i) a swap or option relating to interest rates, spot or other foreign exchange agreements, currency, an equity index or equity, a debt index or debt, commodity indexes or commodities, weather, emissions or inflation;

(ii) a total return, credit spread or credit swap;

(iii) any agreement or transaction similar to an agreement that is referred to in sub-paragraph (i) or (ii) and is the subject of recurrent dealing in the swaps or derivatives markets.

(3) But a master agreement for any contract or agreement referred to in sub-paragraph (2) is not a relevant contract for the purposes of this Part of this Schedule.

(4) For the purposes of sub-paragraph (2), “commodities” includes—

(a) units recognised for compliance with the requirements of EU Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading,

(b) allowances under paragraph 5 of Schedule 2 to the Climate Change Act 2008 relating to a trading scheme dealt with under Part 1 of that Schedule (schemes limiting activities relating to emissions of greenhouse gas), and

(c) renewables obligation certificates issued—

(i) by the Gas and Electricity Markets Authority under an order made under section 32B of the Electricity Act 1989, or

(ii) by the Northern Ireland Authority for Utility Regulation under the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)) and pursuant to an order made under Articles 52 to 55F of that Order.

Restriction on termination etc U.K.

7 (1) Where this Schedule applies in relation to an insurer, a provision of a relevant contract, entered into by the insurer before the insurer first enters into financial difficulties, ceases to have effect if, and to the extent that, under the provision—

(a) the contract would terminate, a supply would cease, or any other thing would occur, because the insurer is in financial difficulties, or

(b) another party to the contract would be entitled to terminate the contract, cease a supply, or do any other thing, because the insurer is in financial difficulties.

(2) Where—

(a) under a provision of a relevant contract, another party to the contract is entitled to terminate the contract, cease a supply, or do any other thing because of an event occurring before the insurer was in financial difficulties, and

(b) the entitlement arises before the insurer was in financial difficulties,

the entitlement may not be exercised while the insurer is in financial difficulties.

(3) A supplier of goods or services to an insurer must not—

(a) make it a condition of a supply of goods or services, while the insurer is in financial difficulties, that any outstanding charges in respect of a supply made to the insurer before the insurer is in financial difficulties are paid, or

(b) do anything which has that effect.

Consent to terminate relevant contracts U.K.

8 (1) Sub-paragraph (2) applies where—

(a) a provision of a relevant contract ceases to have effect under paragraph 7(1), or

(b) an entitlement under a provision of a relevant contract is not exercisable under paragraph 7(2).

(2) A party to the contract (other than the insurer) may terminate the contract, or do another thing in relation to the contract, if consent to terminate the contract or do that other thing (as the case may be) has been given by—

(a) the court,

(b) a relevant office holder, or

(c) where there is no relevant office-holder, the insurer.

(3) For these purposes, “relevant office-holder” means an administrator or provisional liquidator of the insurer (but does not include a person appointed to act as the manager of a write-down order that has effect in relation to the insurer).

(4) The court, a relevant office-holder or the insurer (as the case may be) may give consent under sub-paragraph (2) only if satisfied that not doing so would cause hardship to any person.

(5) As soon as reasonably practicable after giving consent under sub-paragraph (2), a relevant office-holder or the insurer must notify the PRA.]