December 02, 2020
Latham & Watkins has advised Rothesay Life Plc
(Rothesay) on its successful appeal against the High Court’s August 2019 refusal
to sanction a proposed £11.2 billion annuity book transfer from The Prudential
Assurance Company Limited (PAC) to Rothesay under Part VII of the Financial
Services and Markets Act 2000. The landmark case represents the first time an
application under Part VII FSMA has been considered in detail by the Court of
In March 2018, Rothesay and PAC entered into a
reinsurance transaction covering a £12bn portfolio of annuities. It was
expected that this would be followed by an insurance business transfer under
Part VII FSMA. The transfer was subject to approval by the High Court. However,
the Court declined to sanction the transfer. Rothesay and PAC appealed the
decision in September 2019.
On 2 December 2020 the Court of Appeal overturned
the High Court’s decision, ruling that the judge had misdirected himself on the
appropriate legal test. The judgment represents the first detailed
consideration of Part VII transfers by the Court of Appeal and is now the
leading case for all future Part VII transfers of insurance business. The
outcome of the appeal was so important to UK insurers – who routinely use the
Part VII procedure to transfer books of business – that the Association of
British Insurers (ABI) applied for, and was given, permission to intervene on
behalf of the UK insurance industry.
Commenting on the judgment, London litigation &
trial partner Jon Holland said: “This landmark decision will be welcomed by the
entire UK insurance industry. The guidance set out by the Court of Appeal
provides much needed clarity and certainty of outcome once the relevant
regulatory hurdles have been crossed.”
Victoria Sander, London insurance M&A partner
added: “This judgment is incredibly important to the
insurance industry and other financial institutions that rely on the Part
VII process to reorganise their businesses.”
The Latham team advised Rothesay on all aspects of
the transaction and the appeal. The London litigation & trial team was led
by partner Jon Holland and associates Alex Cox and Duncan Graves. Advice on the
transfer of the annuity book was provided by London insurance M&A partner
Victoria Sander and associate Jessica Corr.
As well as the ABI, the PRA, FCA and a number of
the policyholders impacted by the transfer participated in the appeal.
To read more about the landmark ruling and its
implications for the insurance industry, click here.