OpenLegislation

The Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2010

S.I. 2010/3023 · Made 18 December 2010 · Extends to United Kingdom

Up to date with all changes known to legislation.gov.uk, revised to 23 July 2019.

Financial Services And Markets

Made 18th December 2010

Laid before Parliament 21st December 2010

Coming into force 1st February 2011

The Treasury, in exercise of the powers conferred on them by sections 360, 426(1) and 428(3) of the Financial Services and Markets Act 2000f1, with the consent of the Secretary of State, make the following Order:C1

Annotations to the whole text

Modifications

C1

Order modified (6.4.2014) by The Co-operative and Community Benefit Societies and Credit Unions (Arrangements, Reconstructions and Administration) Order 2014 (S.I. 2014/229), art. 1, Sch. 5 para. 3 (as amended (1.8.2014) by The Co-operative and Community Benefit Societies and Credit Unions (Arrangements, Reconstructions and Administration) (Amendment) Order 2014 (S.I. 2014/1822), arts. 1(2), 8(b))

Footnotes

f1

2000 c.8.

Contents

  1. 1Citation, commencement and interpretation
  2. 2Application and modification of Part 2 of the 1986 Act in relation to insurers
  3. 3Application and modification of the Insolvency (England and Wales) Rules 2016 in relation to insurers
  4. 4Application and modification of the Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018 in relation to insurers
  5. 5Revocation
  6. 6Saving
  7. Signature
  8. Schedule: Modifications of Part 2 of the Insolvency Act 1986 in relation to insurers
  9. 1Paragraph 1
  10. 2Paragraph 2
  11. 3Paragraph 3
  12. 3AParagraph 3A
  13. 4Paragraph 4
  14. 5Paragraph 5
  15. 6Paragraph 6
  16. 7Paragraph 7 Repealed
  17. 8Paragraph 8
  18. 9Paragraph 9
  19. 10Paragraph 10
  20. 11Paragraph 11 Repealed
  21. Explanatory note

1Citation, commencement and interpretationI1

(1)

This Order may be cited as the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2010 and comes into force on 1st February 2011.

(2)

In this Order—

  • “the 1986 Act” means the Insolvency Act 1986f1;

  • “Schedule B1” means Schedule B1 to the 1986 Actf2.

2Application and modification of Part 2 of the 1986 Act in relation to insurersI1

(1)

Part 2 of the 1986 Act (administration), other than paragraph 14 of Schedule B1 (power of holder of floating charge to appoint administrator) and paragraph 22 of Schedule B1 (power of company or directors to appoint administrator), applies in relation to insurers with the modifications specified in the Schedule to this Order.

(2)

Accordingly paragraph 9(2) of Schedule B1 does not preclude the making of an administration order in relation to an insurer.

3Application and modification of the Insolvency (England and Wales) Rules 2016 in relation to insurersF4I1

The F1Insolvency (England and Wales) Rules 2016, so far as they give effect to Part 2 of the 1986 Act, have effect in relation to insurers with the following modifications—

(a)

in F2rule 3.12(1) (the hearing) after sub-paragraph (a) insert—

“(aa)

the F3Financial Conduct Authority and, where the person is a PRA-authorised person within the meaning of the Financial Services and Markets Act 2000, the Prudential Regulation Authority;

(ab)

the scheme manager of the Financial Services Compensation Scheme;”.

4Application and modification of the Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018 in relation to insurersF4I1

The F1Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018 so far as they give effect to Part 2 of the 1986 Act, have effect in relation to insurers with the following modifications—

(a)

in F2Rule 3.6 (application) after subparagraph (a) insert—

“(aa)

the F3the Financial Conduct Authority and, where the person is a PRA-authorised person within the meaning of the Financial Services and Markets Act 2000, the Prudential Regulation Authority;”

(ab)

the scheme manager of the Financial Services Compensation Scheme;”.

5RevocationI1

The following are revoked—

(a)

the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002f1;

(b)

articles 2 to 8 of the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) (Amendment) Order 2003f2;

(c)

regulation 52 of the Insurers (Reorganisation and Winding Up) Regulations 2004f3.

6SavingI1

Nothing in articles 2 to 5 applies in relation to any case where the appointment of an administrator takes effect before the coming into force of this Order.

Signature

Michael Fabricant

Jeremy Wright

Two of the Lords Commissioners of Her Majesty’s Treasury

16th December 2010

I consent

Edward Davey

Minister for Employment Relations and Consumer and Postal Affairs

Department for Business, Innovation and Skills

18th December 2010

1I1

(1)

In paragraph 3 of Schedule B1 (purpose of administration)—

(a)

at the beginning of sub-paragraph (1) insert “Subject to sub-paragraph (1A)”;

(b)

after sub-paragraph (1) insert—

“(1A)

The administrator of an insurer which effects or carries out contracts of insurance shall, at the request of the scheme manager of the Financial Services Compensation Scheme, provide any assistance identified by the scheme manager as being necessary—

(a)

to enable the scheme manager to administer the compensation scheme in relation to contracts of insurance, and

(b)

to enable the scheme manager to secure continuity of insurance in relation to contracts of long-term insurance.

(1B)

For the purposes of this Schedule—

(a)

“compensation scheme” has the same meaning as in section 213 of the Financial Services and Markets Act 2000;

(b)

“contracts of insurance” and “contracts of long-term insurance” have the same meaning as in article 3 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001f1;

(c)

“scheme manager” means the body corporate established by the Financial Services Authority under section 212 of the Financial Services and Markets Act 2000.”.

(2)

In sub-paragraph (2), for “sub-paragraph (4),” substitute “sub-paragraphs (1A) and (4) and to paragraph 3A”.

2I1

(1)

After paragraph 3 of Schedule B1, insert—

“3A.
(1)

This paragraph applies in relation to the administration of an insurer which effects or carries out contracts of long-term insurance.

(2)

Unless the court orders otherwise, the administrator must carry on the insurer’s business so far as that business consists of carrying out the insurer’s contracts of long-term insurance (“the long-term insurance business”) with a view to the business being transferred as a going concern to a person who may lawfully carry out those contracts.

(3)

In carrying on the long-term insurance business, the administrator—

(a)

may agree to the variation of any contracts of insurance in existence when the administration order is made; but

(b)

must not effect any new contracts of insurance without the approval of the F1Prudential Regulation Authority and, if the insurer is not a PRA-authorised person within the meaning of the Financial Services and Markets Act 2000, the Financial Conduct Authority.

(4)

If the administrator is satisfied that the interests of the creditors in respect of liabilities of the insurer attributable to contracts of long-term insurance effected by it require the appointment of a special manager, the administrator may apply to the court.

(5)

On such an application, the court may appoint a special manager to act during such time, and to have such powers (including powers of a receiver or manager) as the court may direct.

(6)

Section 177(5) of this Act (duties of special manager) applies to a special manager appointed under sub-paragraph (5) as it applies to a special manager appointed under section 177.

(7)

If the court thinks fit, it may reduce the value of one or more of the contracts of long-term insurance effected by the insurer.

(8)

Any reduction is to be on such terms and subject to such conditions (if any) as the court thinks fit.

(9)

The court may, on the application of an official, appoint an independent actuary to investigate the insurer’s long-term insurance business and to report to the official—

(a)

on the desirability or otherwise of the insurer’s long-term insurance business being continued; and

(b)

on any reduction in the contracts of long-term insurance effected by the insurer that may be necessary for successful continuation of the insurer’s long-term insurance business.

(10)

“Official” means—

(a)

the administrator;

(b)

a special manager appointed under sub-paragraph (5); or

(c)

the F2Financial Conduct Authority or the Prudential Regulation Authority.”.

3I1

In paragraph 49(4) of Schedule B1 (administrator’s proposals), omit “and” at the end of paragraph (b) and at the end of paragraph (c) add—

“(d)

to the F1Financial Conduct Authority and the Prudential Regulation Authority, and

(e)

to the scheme manager of the Financial Services Compensation Scheme.”.

3AF1

(1)

For the purposes of paragraph 51 of Schedule B1 a decision of the insurer’s creditors as to whether they approve the proposals set out in the administrator’s statement made under paragraph 49(1) of Schedule B1 is required to be made by a qualifying decision procedure.

(2)

At the time of seeking that decision the administrator must also seek a decision from the insurer’s creditors as to whether they consent to the exercise by the administrator of the powers specified in Schedule 1 to the 1986 Act.

(3)

That decision is also required to be made by a qualifying decision procedure.

4I1

In paragraph 53(2) of Schedule B1 F1(creditors’ decision), omit “and” at the end of paragraph (b) and at the end of paragraph (c), add—

“(d)

the F2Financial Conduct Authority and the Prudential Regulation Authority, and

(e)

to the scheme manager of the Financial Services Compensation Scheme.”.

5I1

In paragraph 54(2)(b) of Schedule B1 (revision of administrator’s proposals), after F1“opted-out creditor” insert “, to the F2Financial Conduct Authority and the Prudential Regulation Authority and to the scheme manager of the Financial Services Compensation Scheme.”.

6I1

In paragraph 76(1) of Schedule B1 (automatic end of administration), for “one year” substitute “30 months”.

7F1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8I1

In paragraph 79(1) of Schedule B1 (court ending administration on application of administrator), after the first reference to “company” insert “or the F1Financial Conduct Authority or the Prudential Regulation Authority”.

9I1

In paragraph 91(1) of Schedule B1 (supplying vacancy in office of administrator)—

(a)

at the end of sub-paragraph (d), omit “or”;

(b)

at the end of sub-paragraph (e), insert “or”;

(c)

after sub-paragraph (e), insert

“(f)

the F1Financial Conduct Authority or the Prudential Regulation Authority ”.

10I1

(1)

The powers of the administrator specified in Schedule 1 to the 1986 Act (powers of administrator or administrative receiver) include the power to make—

(a)

any payments due to a creditor; or

(b)

any payments on account of any sum which may become due to a creditor.

(2)

Any payments to a creditor made pursuant to sub-paragraph (1) must not exceed, in aggregate, the amount which the administrator reasonably considers that the creditor would be entitled to receive on a distribution of the insurer’s assets in a winding up.

F1(3)

The powers conferred by sub-paragraph (1) may be exercised until the initial decision date for the decision referred to in paragraph 51(1), but may only be exercised after that date—

(a)

if—

(i)

the administrator, when seeking the decision referred to in paragraph 3A(2), gave the creditors a statement containing the information specified in sub-paragraph (4); and

(ii)

a majority in number representing three-fourths in value of the creditors has consented to the exercise by the administrator of those powers; or

(b)

with the consent of the court.

(4)

The information referred to in sub-paragraph (3)(a)(i) is an estimate of the aggregate amount of—

(a)

the insurer’s assets and liabilities (whether actual, contingent or prospective); and

(b)

all payments which the administrator proposes to make to creditors pursuant to sub-paragraph (1);

including any assumptions which the administrator has made in calculating that estimate.

F2(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11F1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Explanatory note

(This note is not part of the Order)

This Order consolidates the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002 (S.I. 2002/1242) and its amending instruments, applying Part 2 of the Insolvency Act 1986 in relation to insurers, and makes further modifications to Schedule B1 to that Act.

Article 2 enables administration orders to be made in relation to insurers, applying Part 2 of the Insolvency Act 1986 to insurers with the modifications set out in the Schedule.

Article 3 makes minor modifications to the Insolvency Rules 1986, ensuring that the Financial Services Authority and the Financial Services Compensation Scheme have a right to be represented at the hearing of an administration application in relation to an insurer.

Article 4 makes the same modifications in relation to the Insolvency (Scotland) Rules 1986.

Article 5 revokes the orders which previously applied Part 2 of the Insolvency Act 1986 to insurers.

An Impact Assessment of the effect that this Order will have on the costs of business is available on HM Treasury’s website (hm-treasury.gov.uk) and is annexed to the Explanatory Memorandum which is available alongside this Order on the legislation.gov.uk website.