In preparing for Brexit, the High Court of England and Wales was approached and has approved, at a preliminary hearing in November 2018, certain key legal principles to be applied in the Part VII Transfer of all European Economic Area (EEA) business to Lloyd’s Brussels.
Lloyd’s sought clarity from the Court on certain key principles that underpin Lloyd's proposed approach to the transfer, given the unique size, nature and complexity of the transfer and the Lloyd’s market. Following a hearing on 20 and 21 November 2018 the Court granted an order approving these principle and did not see any roadblocks to the proposed approach. This is a positive step forward in the Lloyd’s planning process.
In the order the Court has approved the following (non-binding) principles in relation to the Part VII Transfer:
- A single combined transfer made by Lloyd’s;
- The transfer to be centrally coordinated by Lloyd’s;
- The transfer will cover all 1993 – 2018 non-life EEA business where managing agents will not be able to service that business post-Brexit without breaching local legal or regulatory requirements;
- Policies that include both EEA and non-EEA elements may be split; and
- For communication with policyholders and subject to appropriate waivers;
- There will be no direct communication with policyholders with policies that have no EEA element;
- Direct communications with policyholders will be limited to cases where there are active claims, where the insurance period is ongoing or where the policy is within a limited look-back period;
- Managing agents will effect the direct communications but where that is not possible they will request that this is carried out by coverholders or by brokers; and
- Whenever possible, communications will be effected electronically and follow a proforma guide prepared by Lloyd’s.
Following the preliminary hearing, Lloyd's has started engaging with Lloyd's market participants to communicate its plans relating to the Part VII Transfer and to outline next steps in relation to the process. Lloyd's will also be required to attend further Court hearings for directions on publicising the transfer and the High Court's approval of the transfer. Lloyd’s will continue to engage with the relevant regulators as its plans develop going forward.
A direction has also been made by the Council of Lloyd’s requiring members, former members and estates of former members of Lloyd’s who have underwritten or assumed EEA liabilities under non-life policies originally allocated to any or all of the 1993 to 2020 (inclusive) years of account to participate in, and appoint Lloyd’s to act on their behalf in relation to, the Lloyd’s Part VII Transfer. Please see the following link for the full text of the direction.