The Insurers (Winding-Up) Rules (Northern Ireland) 2005

Made: 18th August 2005

To be laid before Parliament

Coming into operation: 19th September 2005

The Lord Chancellor, in exercise of the powers conferred upon him by Article 359 of the Insolvency (Northern Ireland) Order 1989[^f00001], and section 379 of the Financial Services and Markets Act 2000[^f00002] and of all other powers enabling him in that behalf, with the concurrence of the Department of Enterprise, Trade and Investment[^f00003], and after consulting the committee existing for that purpose under Article 360 of the said Order, hereby makes the following Rules:

Citation, commencement and revocation

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• (1) These Rules may be cited as the Insurers (Winding-Up) Rules (Northern Ireland) 2005 and shall come into operation on 19th September 2005.

• (2) The Insurance Companies (Winding-Up) Rules (Northern Ireland) 1992[^f00004] are hereby revoked.

Interpretation

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• (1) In these Rules—

• “the 2000 Act” means the Financial Services and Markets Act 2000;

• ...

• “company” means an insurer which is being wound up;

• “contract of general insurance” and “contract of long-term insurance” have the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001[^f00005];

• “the Department” means the Department of Enterprise, Trade and Investment;

• “excess of the long-term business assets” means the amount, if any, by which the value of the assets representing the fund or funds maintained by the company in respect of its long-term business as at the liquidation date exceeds the value as at that date of the liabilities of the company attributable to that business;

• “excess of the other business assets” means the amount, if any, by which the value of the assets of the company which do not represent the fund or funds maintained by the company in respect of its long-term business as at the liquidation date exceeds the value as at that date of the liabilities of the company (other than liabilities in respect of share capital) which are not attributable to that business;

• “Financial Services Compensation Scheme” means the scheme established under section 213 of the 2000 Act;

• “general business” means the business of effecting or carrying out a contract of general insurance;

• “the general regulations” means the Insolvency Regulations (Northern Ireland) 1996[^f00006];

• “insurer” has the meaning given by Article 2 of the Financial Services and Markets Act 2000 (Insolvency) (Definition of “Insurer”) Order 2001[^f00007];

• “linked liability” means any liability under a policy the effecting of which constitutes the carrying on of long-term business the amount of which is determined by reference to—the value of property of any description (whether or not specified in the policy),fluctuations in the value of such property,income from any such property, orfluctuations in an index of the value of such property;

• “linked policy” means a policy which provides for linked liabilities and a policy which when made provided for linked liabilities is deemed to be a linked policy even if the policy holder has elected to convert his rights under the policy so that at the liquidation date there are no longer linked liabilities under the policy;

• “liquidation date” means the date of the winding-up order or the date on which a resolution for the winding-up of the company is passed by the members of the company (or the policy holders in the case of a mutual insurance company) and, if both a winding-up order and winding-up resolution have been made, the earlier date;

• “long-term business” means the business of effecting or carrying out any contract of long-term insurance;

• “non-linked policy” means a policy which is not a linked policy;

• “the 1979 Order” means the Industrial Assurance (Northern Ireland) Order 1979[^f00008];

• “the 1986 Order” means the Companies (Northern Ireland) Order 1986[^f00009];

• “the 1989 Order” means the Insolvency (Northern Ireland) Order 1989;

• “other business”, in relation to a company carrying on long-term business, means such of the business of the company as is not long-term business;

• “the principal Rules” means the Insolvency Rules (Northern Ireland) 1991[^f00010];

• “stop order”, in relation to a company, means an order of the High Court made under section 376(2) of the 2000 Act, ordering the liquidator to stop carrying on the long-term business of the company;

• “unit” in relation to a policy means any unit (whether or not described as a unit in the policy) by reference to the numbers and value of which the amount of the liabilities under the policy at any time is measured.

• (2) Unless the context otherwise requires, words or expressions contained in these Rules bear the same meaning as in the principal Rules, the general regulations, the 1989 Order, the 2000 Act or any statutory modification thereof respectively.

• (3) The Interpretation Act (Northern Ireland) 1954[^f00011] shall apply to these Rules as it applies to an Act of the Northern Ireland Assembly.

Application

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• (1) These Rules apply to proceedings for the winding-up of an insurer which commence on or after the date on which these Rules come into operation.

• (2) These Rules supplement the principal Rules and the general regulations which continue to apply to the proceedings in the winding-up of an insurer under the 1989 Order as they apply to proceedings in the winding-up of any company under that Order; but in the event of a conflict between these Rules and the principal Rules or the general regulations these Rules prevail.

Appointment of liquidator

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Where the High Court is considering whether to appoint a liquidator under—

• (a) Article 118(4) of the 1989 Order (appointment of liquidator where conflict between creditors and contributories), or

• (b) Article 119 of the 1989 Order (appointment of liquidator following administration or voluntary arrangement),

the manager of the Financial Services Compensation Scheme may appear and make representations to the Court as to the person to be appointed.

Maintenance of separate financial records for long-term and other business in winding-up

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• (1) This rule applies in the case of a company carrying on long-term business in whose case no stop order has been made.

• (2) The liquidator shall prepare and keep separate financial records in respect of the long-term business and the other business of the company.

• (3) Paragraphs (4) and (5) apply in the case of a company to which this rule applies which also carries on permitted general business (‘a hybrid insurer’).

• (4) Where, before the liquidation date, a hybrid insurer has, or should properly have, apportioned the assets and liabilities attributable to its permitted general business to its long-term business for the purposes of any accounts, those assets and liabilities must be apportioned to its long-term business for the purposes of complying with paragraph (2) of this rule.

• (5) Where, before the liquidation date, a hybrid insurer has, or should properly have, apportioned the assets and liabilities attributable to its permitted general business other than to its long-term business for the purposes of any accounts, those assets and liabilities must be apportioned to its other business for the purposes of complying with paragraph (2) of this rule.

• (6) Regulation 10 of the general regulations (financial records) applies only in relation to the company’s other business.

• (7) In relation to the long-term business, the liquidator shall, with a view to the long-term business of the company being transferred to another insurer, maintain such accounting, valuation and other records as will enable such other insurer upon the transfer being effected to comply with the requirements of any rules made by Financial Conduct Authority or the Prudential Regulation Authority under Part X of the 2000 Act relating to accounts and statements of insurers.

• (8) In paragraphs (4) and (5)—

• (a) “accounts” means any accounts or statements maintained by the company in compliance with a requirement under the 1986 Order or any rules made by Financial Conduct Authority or the Prudential Regulation Authority under Part X of the 2000 Act;

• (b) “permitted general business” means the business of effecting or carrying out a contract of general insurance where the risk insured against relates to either accident or sickness.

Valuation of general business policies

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Except in relation to amounts which have fallen due for payment before the liquidation date and liabilities referred to in paragraph 2(1)(b) of Schedule 1, the holder of a general business policy shall be admitted as a creditor in relation to his policy without proof for an amount equal to the value of the policy and for this purpose the value of a policy shall be determined in accordance with Schedule 1.

Valuation of long-term policies

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• (1) This Rule applies in relation to a company’s long-term business where no stop order has been made.

• (2) In relation to a claim under a policy which has fallen due for payment before the liquidation date, a policy holder shall be admitted as a creditor without proof for such amount as appears from the records of the company to be due in respect of that claim.

• (3) In all other respects a policy holder shall be admitted as a creditor in relation to his policy without proof for an amount equal to the value of the policy and for this purpose the value of a policy of any class shall be determined in the manner applicable to policies of that class provided by Schedules 2, 3 and 4.

• (4) This Rule applies in relation to a person entitled to apply for a free paid-up policy under Article 30 of the 1979 Order (provisions as to forfeited policies) and to whom no such policy has been issued before the liquidation date (whether or not it was applied for) as if such a policy had been issued immediately before the liquidation date—

• (a) for the minimum amount determined in accordance with Article 30(2) and (3) of the 1979 Order, or

• (b) if the liquidator is satisfied that it was the practice of the company during the five years immediately before the liquidation date to issue policies under Article 30 of that Order in excess of the minimum amounts so determined, for the amount determined in accordance with that practice.

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• (1) This Rule applies in relation to a company’s long-term business where a stop order has been made.

• (2) In relation to a claim under a policy which has fallen due for payment on or after the liquidation date and before the date of the stop order, a policy holder shall be admitted as a creditor without proof for such amount as appears from the records of the company and of the liquidator to be due in respect of that claim.

• (3) In all other respects a policy holder shall be admitted as a creditor in relation to his policy without proof for an amount equal to the value of the policy and for this purpose the value of a policy of any class shall be determined in the manner applicable to policies of that class provided by Schedule 5.

• (4) Rule 7(4) applies for the purposes of this Rule as if references to the liquidation date (other than that in sub-paragraph (b) of that paragraph) were references to the date of the stop order.

Attribution of liabilities to company’s long-term business

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• (1) This Rule applies in the case of a company carrying on long-term business if at the liquidation date there are liabilities of the company in respect of which it is not clear from the accounting and other records of the company whether they are or not attributable to the company’s long-term business.

• (2) The liquidator shall, in such manner and according to such accounting principles as he shall determine, identify the liabilities referred to in paragraph (1) as attributable or not attributable to a company’s long-term business and those liabilities shall for the purpose of the winding-up be deemed as at the liquidation date to be attributable or not as the case may be.

• (3) For the purpose of paragraph (2) the liquidator may—

• (a) determine that some liabilities are attributable to the company’s long-term business and that others are not (the first method); or

• (b) determine that a part of a liability shall be attributable to the company’s long-term business and that the remainder of the liability is not (the second method),

and he may use the first method for some of the liabilities and the second method for the remainder of them.

• (4) Notwithstanding anything in paragraph (1) to (3), the High Court may order that the determination of which (if any) of the liabilities referred to in paragraph (1) are attributable to the company’s long-term business and which (if any) are not shall be made in such manner and by such methods as the Court may direct or the Court may itself make the determination.

Attribution of assets to company’s long-term business

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• (1) This Rule applies in the case of a company carrying on long-term business if at the liquidation date there are assets of the company in respect of which—

• (a) it is not clear from the accounting and other records of the company whether they do or do not represent the fund or funds maintained by the company in respect of its long-term business, and

• (b) it cannot be inferred from the source of the income out of which those assets were provided whether they do or do not represent those funds.

• (2) Subject to paragraph (6) the liquidator shall determine which (if any) of the assets referred to in paragraph (1) are attributable to those funds and which (if any) are not and those assets shall, for the purpose of the winding-up, be deemed as at the liquidation date to represent those funds or not in accordance with the liquidator’s determination.

• (3) For the purpose of paragraph (2) the liquidator may—

• (a) determine that some of those assets shall be attributable to those funds and that others of them shall not (the first method); or

• (b) determine that a part of the value of one of those assets shall be attributable to those funds and that the remainder of that value shall not (the second method),

and he may use the first method for some of those assets and the second method for others of them.

• (4)

• (a) In making the attribution the liquidator’s objective shall in the first instance be so far as possible to reduce any deficit that may exist, at the liquidation date and before any attribution is made, either in the company’s long-term business or in its other business.

• (b) If there is a deficit in both the company’s long-term business and its other business the attribution shall be in the ratio that the amount of the one deficit bears to the amount of the other until the deficits are eliminated.

• (c) Thereafter the attribution shall be in the ratio which the aggregate amount of the liabilities attributable to the company’s long-term business bears to the aggregate amount of the liabilities not so attributable.

• (5) For the purpose of paragraph (4) the value of a liability of the company shall, if it falls to be valued under Rule 6 or 7, have the same value as it has under that Rule but otherwise it shall have such valued as would have been included in relation to it in a balance sheet of the company prepared in accordance with the 1986 Order as at the liquidation date; and for the purpose of determining the ratio referred to in paragraph (4) but not for the purpose of determining the amount of any deficit therein referred to, the net balance of shareholders' funds shall be included in the liabilities not attributable to the company’s long-term business.

• (6) Notwithstanding anything in paragraphs (1) to (5), the High Court may order that the determination of which (if any) of the assets referred to in paragraph (1) are attributable to the fund or funds maintained by the company in respect of its long-term business and which (if any) are not shall be made in such manner and by such methods as the Court may direct or the Court may itself make the determination.

Excess of long-term business assets

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• (1) Where the company is one carrying on long-term business and in whose case no stop order has been made, for the purpose of determining the amount, if any, of the excess of the long-term business assets, there shall be included amongst the liabilities of the company attributable to its long-term business an amount determined by the liquidator in respect of liabilities and expenses likely to be incurred in connection with the transfer of the company’s long-term business as a going concern to another insurance company being liabilities not included in the validation of the long-term policies made in pursuance of Rule 7.

• (2) Where the liquidator is carrying on the long-term business of an insurer with a view to that business being transferred as a going concern to a person or persons (“transferee”) who may lawfully carry out those contracts (or substitute policies being issued by another insurer), the liquidator may, in addition to any amounts paid by the Financial Services Compensation Scheme for the benefit of the transferee to secure such a transfer or to procure substitute policies being issued, pay to the transferee or other insurer all or part of such funds or assets as are attributable to the long-term business being transferred or substituted.

Actuarial advice

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• (1) Before doing any of the following, that is to say—

• (a) determining the value of a policy in accordance with Schedules 1 to 5 (other than paragraph 3 of Schedule 1);

• (b) identifying long-term liabilities and assets in accordance with Rules 9 and 10;

• (c) determining the amount (if any) of the excess of the long-term business assets in accordance with Rule 11;

• (d) determining the terms on which he will accept payment of overdue premiums under Rule 21(1) or the amount and nature of any compensation under Rule 21(2);

the liquidator shall obtain and consider advice thereon (including an estimate of any value or amount required to be determined) from an actuary.

• (2) Before seeking, for the purpose of valuing a policy, the direction of the High Court as to the assumption of a particular rate of interest or the employment of any rates of mortality or disability, the liquidator shall obtain and consider advice thereon from an actuary.

Utilisation of excess of assets

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