Prudential Regulation Authority Rulebook

4.1

As they proceed under the Companies Act 2006, the PRA does not approve schemes. Also, it is for the Court to determine whether to sanction schemes. However, the PRA will review all schemes proposed by insurance firms to assess the risks to its statutory objectives. Having assessed a scheme proposal the PRA will consider in each case whether it should inform the court of its view of a scheme and if so, what form that communication should take.

4.2

In accordance with Principle 11 of the Principles for Businesses (Relations with regulators)² and to enable its review the PRA expects insurance firms which are considering the use of a scheme to inform the PRA in advance, in a way which allows sufficient time for the PRA to assess the proposals. The firm should explain to the PRA the nature of the business included in the scheme and the nature of the underlying policyholders. The PRA expects firms to be able to explain to the PRA the reasons why they believe the use of a scheme is compatible with the PRA’s statutory objectives and, in particular, what steps have been taken or could be taken to ensure that policyholders have an appropriate degree of continuity of cover for the risks against which they are insured. For example, depending on the nature of the business and the nature of the policyholders, the PRA may ask firms to explain what arrangements they have considered for policyholders who do not support the scheme.

4.3

In assessing a proposal from an insurer to use a scheme and in deciding whether or not it wishes to present its views to the Court, the PRA will consider each proposed scheme bearing in mind all facts and circumstances relevant to that scheme. The PRA recognises the diversity of insurers and the need appropriately to apply its approach:

• to the particular business of the insurance firm or firms involved when assessing any adverse effects which may result from any disruption to the continuity of financial services; and
• when considering the extent to which policyholders would have an appropriate degree of continuity of cover for the risks they are insured against if the scheme were to be approved by the Court.