Part VII transfers are court-sanctioned novations of portfolios of insurance policies from one insurer to another. They are typically used by insurers as a means of disposing of business that no longer fits with their future strategy, achieving both legal and financial finality, or as a means of consolidating business into a single insurer, often following an acquisition.
The process generally takes a year or more to complete and begins with notifying the Prudential Regulation Authority (PRA). The PRA must approve the appointment of an independent expert (usually an actuary) who will assess whether any party will be materially adversely affected by the transfer. The independent expert prepares a report outlining the results of their analysis, which is submitted to the court ahead of the first of two hearings, known as the ‘directions hearing’. The PRA and Financial Conduct Authority (FCA) also prepare reports to the court outlining their respective views regarding the proposed transfer. Both will also review the independent expert’s report prior to its finalisation, with the PRA being required to approve the form of the report. Following the directions hearing, assuming that the judge is satisfied at the hearing that the transfer process should proceed, the parties to the transfer will notify relevant policyholders and other parties impacted by the proposed transfer, in accordance with a communications plan approved at the directions hearing. Subsequent to notifications being made, a period of at least six weeks is normally expected before the transfer can proceed to the final ‘sanction hearing’. Ahead of the sanction hearing, the independent expert submits a further report, providing details of any updates to their analysis since the initial report, including commenting on issues or objections raised by interested parties subsequent to receiving the notifications, and whether this has led to any changes in the conclusions set out in the earlier report. The PRA and FCA also provide further submissions to the court ahead of the sanction hearing. Any other affected party may also make representations at the hearing. Ultimately the judge has discretion to sanction or deny the proposed transfer.
