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In the matter of (1) Pearl Assurance (Unit Linked Pensions) Ltd (2) Pearl Assurance (Unit Funds) Ltd (3) London Life Linked Assurances Ltd (4) NPI Ltd

Before the court exercised its discretionary power to sanction an insurance business transfer scheme that varied contractual rights beyond what was necessary for the substitution of one obligor for another under the relevant policies, the fact that the scheme was intended to bring about the exercise of such a power ought to be brought sufficiently to the attention of policyholders and the Financial Services Authority.

29 September 2006

The applicants (P) applied for an order sanctioning a scheme for the transfer of the entire long-term insurance business carried on by three subsidiaries of Pearl Group to another group subsidiary. The business rationale for the scheme was that the four companies were all closed to new business so that their fixed costs per policy would increase over time and the consolidation of their businesses into a single company would lead to cost savings in the longer term. The scheme in para 16.4 also gave the transferee company (N) the power to close, amalgamate or restructure its unit-linked funds in the future when they became too small to manage cost-effectively. Policyholders objected to the scheme on the basis that that aspect would make it easier for N to reduce the choice of funds available. It emerged at the hearing that some, but not all, of the policies affected by the scheme already contained a contractual power enabling the relevant issuing company to make such changes to its li...

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