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 113:  Appointment of actuary in relation to reduction of benefits

216. This section enables a court, in response to an application from the Authority, to appoint an independent actuary to report on a business transfer in particular circumstances.  This is aimed particularly at situations where a company from which business is to be transferred is in financial difficulties and unlikely to be able to meet all of its obligations to policyholders or other creditors.  By the application of insolvency law, the policyholders would only be entitled to recover a proportion of the amounts due to them.

217. Section 112 enables the court to sanction a transfer that has the effect of reducing liabilities to policyholders, since in many cases allowing the transfer to a solvent company will be preferable to leaving the policyholder to recover money due from the insolvent insurer.  In practice, a transfer would most likely only be approved where the effect was no worse than if it did not go ahead.  The purpose of this section is to enable the court to take an informed view about the proposed reduction in benefits, to ensure that policyholders interests are properly protected.  A policyholder who suffered loss in such circumstances might be able to make a claim to the compensation scheme under Part XV of the Act.