Financial Services and Markets Act 2000

Financial Services and Markets Act 2000

2000 CHAPTER 8

Commentary on Sections

Part Vii: Control of Business Transfers

Section 105: Insurance business transfer schemes

197. This section defines the insurance business transfers covered by the new mechanism.  It only applies to transfer schemes where, after the transfer, the business transferred will be carried on from an establishment in the EEA, and where prior to the transfer all or part of the business to be transferred is:

• carried on, wholly or in part, in the EEA by a “UK authorised person” (defined in subsection (8)); or

• reinsurance business and it is carried on in the UK branch of an EEA firm (see Schedule 3); or

• carried on, wholly or in part, in the United Kingdom by an authorised person who is neither a UK authorised person nor an EEA firm.

198. In each case the authorised person transferring the business must have the appropriate permission under Part IV of, or Schedule 3 to, the Act.

199. However, subsection (3) sets out a series of cases for which the new mechanism does not apply. The mechanism does not apply where the transferor is a friendly society (referred to as case 1). Such transfers are covered by provisions in the Friendly Societies Act 1992.  The other cases are where the arrangements under this Part do not apply are:

• transfers of reinsurance business by UK authorised persons which have been approved by a court in another EEA State or by the relevant regulator in the State or States in which it is carried on (case 2);

• transfers of business carried on outside the EEA which do not include policies (other than reinsurance policies) against risks arising in the EEA, and which have been approved by the courts or relevant authorities in a non-EEA State (case 3);

• where each of the policyholders has consented to the transfer, in cases of reinsurance business and entities where the policyholders are ‘controllers’ (within the meaning of Part XII) of the firm or other firms in the same group, essentially “captive” insurers (case 4).

200. Subsections (5) to (7) ensure that the powers of a court to make orders under the Companies Act (and the equivalent Northern Ireland provisions) dealing with schemes for reconstruction (compromises or arrangements agreed with creditors) can apply in transfers covered by the arrangements under the Part.