FSA/PN/116/2001
13/09/2001

Under new requirements published today by the Financial Services Authority, policyholders will be given more information about what would happen to their policy contract if it is transferred to another insurance company. Such transfers take place as part of a restructuring of an insurance company, for example following a takeover or merger. Policyholders consent is not required for a transfer, although it may affect their policies.

From 1 December, procedures for non-life companies will be brought into line with those for life companies, with transfers of policies from one insurer to another needing to be approved by the court.

In addition, for transfers of both life and non-life policies after 1 December, the expert appointed to provide an opinion to the court on any transfer scheme will need to be approved by the FSA. The experts opinion will be made available to the policyholders of the firms involved in the transfer, thus improving the information available to non-life policyholders.

The experts opinion will describe the effect of the transfer on policyholders, and give reasons for his opinion. Policyholders can use this information to help them assess whether the transfer might harm their interests.

The FSA has the right to be heard by the court and intends to use this power to ensure that its views are taken into account, both on the fairness or otherwise to policyholders of any scheme and on whether policyholders have been given suitable information to assess the scheme.

Notes for editors

  1. Transfers of insurance business, which occur as a consequence of takeovers, mergers or other situations, affect policyholders by moving their contract from one insurer to another, but their consent is not required. The Insurance Companies Act 1982, which had procedures covering the interests of policyholders in a transfer, is being repealed. The new regime for insurance business transfers is being brought into effect from 1 December 2001 by Part VII of the Financial Services and Markets Act.

  2. Consultation Paper 110 Insurance Business and Friendly Society Transfers seeks comments by 19 October 2001 on the application of Part VII of the Act.

  3. Under Part VII of the Act, the FSA has a number of roles:

    • the FSA must nominate or approve the person making the Scheme report;

    • the scheme report must be in a form approved by the FSA;

    • the FSA is entitled to be heard by the court on an application to sanction a transfer scheme;

    • where benefits are to be reduced under the scheme, the FSA may request the court to appoint an independent actuary to investigate the business transferred and report to the FSA.

  4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000; maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

  5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.

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