The French Constitutional Court, in a decision dated 6 February 2015, found that Article L 612-33 §5 of the Monetary and Financial Code (CMF) was contrary to the constitutional principle of protection of property, insofar as it granted the prudential and financial regulatory authority (ACPR) the right to order the transfer of all or some of the insurance contracts of a company facing severe difficulties.
Under Article L 612-33 CMF, the ACPR, when it determines that the solvency or the liquidity of a company, or the interests of its assured, are – or are likely to be – compromised, may take various measures to supervise or even control and limit this company’s business. Among these measures is the option of arranging for the transfer of a portfolio without consultation or compensation for the insurance company.
The ACPR took such a measure in relation to a French professional indemnity insurer with a negative net income and a decrease in equity. Before the Constitutional Court the insurance company contended that the transfer amounted to a deprivation of property without compensation, which is contrary to Article 17 of the 1789 Declaration of the Rights of Man.
The Constitutional Court agreed with the company and declared that the power vested in the ACPR to transfer all or some of the insurance contracts under Article L 612-33 §5 CMF was unconstitutional. As a consequence of this ruling, the ACPR no longer has the right to order the transfer of a company’s portfolio.