On 3 November 2006 HM Treasury published a consultation paper seeking comments on four draft statutory instruments amending the legislation governing the transfer of insurance business contained in Part VII of the Financial Services and Markets Act 2000 (FSMA) and associated statutory instruments (Part VII).
Responses are invited by 26 January 2007.
The proposed amendments are:
- to clarify that the court has power to order the transfer of contracts ancillary to the insurance portfolio being transferred, including reinsurance contracts;
- to clarify that the court has power to override explicit contractual provisions in reinsurance contracts prohibiting transfers or stipulating that a transfer triggers a right (for example to terminate the contract or to impose different terms);
- to require transferors to notify reinsurers whose contracts are being transferred of the proceedings; and
- to allow former members of Lloyd’s who resigned their membership before 24 December 1996 to avail themselves of the process.
The proposed amendments are welcome, as they either reflect developing case law and market practice or they rectify unintended anomalies.
The Treasury will consult further on changes required following the implementation of the Reinsurance Directive early in 2007; this will probably give rise to more fundamental changes in the operation of Part VII.