On 6 February 2015 the French Constitutional Court held that article L. 612-33 §8 of the French Monetary and Financial Code was contrary to the principle of constitutional protection of property, insofar as it granted the French 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, without consultation with the insurance company or provision of any compensation.
In response to this, a draft law for transparency and modernisation of the economy, known as the Sapin IIdraft law, has been put forward. This aims to reinstate the possibility of automatic portfolio transfer, but this time in accordance with the French Constitution, by giving the insurance company the opportunity to organise a transfer itself in exchange for appropriate compensation.
According to article 21 of the draft law, an insurance company that encounters significant financial difficulties would be ordered by the ACPR to submit a portfolio transfer request in accordance with article L. 324-1 of the French Insurance Code and within not less than four months. An authorisation request would then be addressed by the insurer to the ACPR before being notified to the insurance company's creditors.
Under the draft law, the creditors would have two months to submit their comments to the ACPR, and the ACPR would then endorse the transfer provided that creditors' and insureds' interests were preserved. In this respect, the ACPR would have still the last word on the transfer of a company's portfolio.
