Financial Services

Reorganisation of life insurance business adequate value of policyholders interests in companys inherited estate evidence of FSA and independent actuary to be preferred to that...Reorganisation of life insurance business adequate value of policyholders interests in companys inherited estate evidence of FSA and independent actuary to be preferred to that of partiesRe Axa Equity & Law Life Assurance Society Plc (No.

2): ChD (Evans-Lombe J): 11 Jan 2001The company sought the courts consent to a scheme of reorganisation of that group of companies life assurance business pursuant to schedule 2C of the Insurance Companies Act 1982.

The court duly received a report from an independent actuary endorsing the reorganisation as being in the best interests of policyholders as well as representations from the Financial Services Authority, the industry regulator, indicating that it was not opposed to the proposed scheme.

M, a policyholder, obtained the permission of the court to oppose the scheme on behalf of approximately 1,400 qualifying policyholders who were opposed to the scheme, and adduced expert evidence from another actuary alleging that the scheme did not adequately value the existing interests of policyholders in the companys inherited estate.David Richards QC and Martin Moore (instructed by Herbert Smith) for the petitioners; Terence Mowschenson QC and Paul Newman for M (instructed by Jacqueline Hewitt, solicitor, Consumers Association); Robert Hildyard QC and Leon Kuschke (instructed by Treasury Solicitor) for the Financial Services Authority (FSA); Mr David Tomlinson, Mr Michael Gascoyne-Cecil and Mr Tony Hitman, objecting policyholders, in person.Held, sanctioning the proposed scheme, that the court had to consider whether Axas offer of incentive payments to policyholders represented a reasonable price to compensate them for waiving their right to receive distributions out of the inherited estate in the future; that prior to the promulgation of the scheme a policyholder would have had no reasonable expectation that the whole or any part of the inherited estate would have ben distributed to him during the currency of his policy; that the proposed incentive payments formed no part of the policyholders reasonable expectations at the time they took out their policies; that whether the incentive payments offered in exchange for a waiver of the restrictions on distributions from the long term fund rendered the scheme unfair depended on which actuarial calculation of the potential risk of certain events occurring was to be preferred; that the court was in a much worse position to forecast future relevant events and market movements than the parties; that where the actuarial evidence was in conflict the approach of the court was to accept the views of the Independent Actuary and the FSA in preference to those of the petitioners or the objectors unless there were compelling reasons, based on proven fact or demon-strable mistakes in calculation or forecast, which pointed to a contrary view; and that where the independent actuary and the FSA were in conflict, the views of the FSA were to be preferred.