The High Court of Justice Business and Property Courts of England & Wales refused to sanction a scheme proposed by Prudential Assurance Co. and Rothesay Life PLC to transfer approximately 370,000 annuity policies from Prudential to Rothesay. The scheme was proposed under Part VII of the Financial Services and Markets Act 2000. As part of the scheme, Prudential and Rothesay entered into a reinsurance agreement to transfer the majority of the economic risk and reward of Prudential’s annuity business covered by the agreement from Prudential to Rothesay. Although the scheme would not change any terms of any policies, the court found that the scheme offered no benefits to the transferred policyholders, who would no longer be entitled to look to Prudential to pay or service their annuities and instead would need to look solely to Rothesay in these respects. The court noted that the scheme was “strenuously opposed” by a number of policyholders, who contended that they selected Prudential as their annuity provider based specifically on its long history as a leading UK insurer, its size, reputation, and financial strength and resources.

On balance, the court concluded that a number of factors weighed heavily against exercising its discretion to sanction the scheme. It emphasized, among other things, the overall fairness of the scheme as between all affected persons, the annuity policyholders in particular. The court found that it was entirely reasonable for policyholders to have chosen Prudential based on its history and reputation, among other factors, and for policyholders to have assumed that Prudential would not seek to transfer their policies to another provider. The court rejected Rothesay’s contention that it would be prejudiced by any decision not to sanction the scheme by refusing it the benefits of the reinsurance agreement with Prudential referenced above, finding that Rothesay entered into the reinsurance agreement knowing the scheme was subject to the court’s sanction and thus was not guaranteed to be approved.

In re Prudential Assurance Co. Ltd. [2019] EWHC (Ch) 2245 (Eng.).