The last two years have seen an increasing number of insurance portfolio transfers in the domestic and cross-border sectors of the Irish insurance industry with the drivers for this activity principally being domestic or international M&A activity, group re-organisations and a number of closures.
Evidence of this trend can be found in the notices relating to portfolio transfers regularly appearing in the newspapers, in Iris Oifigiúil and by examining the High Court list with recent examples including those involving Quinn Insurance (to Liberty), Canada Life (inter group), Quinn-Life Direct (to Irish Life), Combined Insurance Company of Europe (to ACE) and Old Mutual (to Skandia – inter group).
Having been involved in a number of portfolio transfers recently both between domestic Irish insurers and between Irish insurers and insurers in other EU Member States, we have set out below an overview of the legal and regulatory regime applicable to portfolio transfers as well of the processes involved, the type of documentation required to be prepared and an idea of the timescales involved.
General Legal Framework
The transfer of the whole or part of a portfolio of insurance (including reinsurance) contracts from one insurance undertaking to another within the European Union ('EU') or European Economic Area ('EEA') must be done in accordance with the requirements of applicable EU insurance directives and the legal requirements of the relevant EU/EEA Member States concerned.
EU legislation clearly sets out the legal and regulatory frameworks which apply to the transfer of portfolios of insurance contracts from one insurer to another within the EU/EEA.
At EU/EEA level, Directive 2002/83/EC (the 'Consolidated Life Directive') provides for the transfer of all or part of the part of the portfolio of life assurance business from one life assure to another while Directive 92/49/EC (the 'Third Non-Life Directive') establishes the framework for the transfer of all or part of the portfolio of non-life insurance business from one non-life insurer to another. Reinsurance portfolios may be transferred in accordance with the requirements of Directive 2005/68/EC (the 'Reinsurance Directive').
Where the portfolio transfer involves an Irish insurance undertaking additional domestic Irish insurance legal and regulatory requirements must be considered. These requirements are largely reflective of the frameworks established by the Consolidated Life Directive, the Third Non-Life Directive and the Reinsurance Directive but it is important to note that the domestic Irish frameworks for the transfer of portfolios of insurance (and reinsurance) contracts may require compliance with specific legal and regulatory provisions and procedures (including High Court procedures) upon which specialist legal advice should be sought. In summary, the transfer of a portfolio of insurance contracts generally requires:
the sanction of the Irish High Court pursuant to the 1909 and 1989 Acts [not required for reinsurance portfolio transfers and certain non life insurance transfers]; and the consent of the Central Bank of Ireland (the 'Central Bank'), the Irish supervisory authority, pursuant to the Life or Non-Life Regulations. Portfolio Transfers - Life and Non-Life Insurance
Where at least one of the undertakings is carrying on business in Ireland, the transfer between insurance undertakings of the whole or part of an insurer's portfolio of insurance contracts may involve compliance with at least the following:
(a) the legislative provisions which transpose the requirements of the Consolidated Life Directive into Irish law, namely the European Communities (Life Assurance)(Framework) Regulations 1994 as amended (the 'Life Regulations'); or
(b) the legislative provisions which transpose the requirements of the Third Non-Life Directive into Irish law, namely the European Communities (Non-Life Insurance)(Framework) Regulations 1994 as amended (the 'Non-Life Regulations'); and
(c) the domestic legislative requirements of Irish insurance law, including the Assurance Companies Act 1909 (the '1909 Act') and the Insurance Act 1989 (the '1989 Act').
Portfolio Transfers – Reinsurance
A transfer between reinsurance undertakings of the whole or part of a reinsurance portfolio may be effected in Ireland in compliance with Regulation 22 of the European Communities (Reinsurance) Regulations 2006 which transpose into Irish law the provisions of the Reinsurance Directive.
The procedure for the transfer of portfolios of reinsurance contracts is procedurally less complex than that in respect of life and non-life portfolios. Firstly, High Court approval is not required in order to effect the transfer from a legal perspective. Secondly, there is no legal procedural restriction on an Irish reinsurance undertaking transferring its portfolio of reinsurance contracts to another person. However, compliance with certain regulatory requirements is...