2021 The Financial Conduct Authority’s ... - pru.co.uk

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IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF

ENGLAND AND WALES

COMPANIES COURT (ChD)

Case No. CR-

2018-003686

IN THE MATTER OF THE PRUDENTIAL ASSURANCE COMPANY LIMITED

AND IN THE MATTER OF ROTHESAY LIFE PLC

AND IN THE MATTER OF THE FINANCIAL SERVICES AND MARKETS ACT 2000

AND IN THE MATTER OF A TRANSFER OF INSURANCE BUSINESS BETWEEN THE

PRUDENTIAL ASSURANCE COMPANY LIMITED (Transferor) and ROTHESAY LIFE

PLC (Transferee)

_____________________________________________________

FOURTH REPORT OF THE

FINANCIAL CONDUCT AUTHORITY

_______________________________________________________

Summary

1. The Financial Conduct Authority (“the FCA”) respectfully refers the Court to its first

to third Reports in this application, dated 29 June 2019, 6 June 2019 and 21 July 2021

(“the First, Second and Third FCA Reports” respectively). This fourth FCA Report

(the “Fourth FCA Report”) supplements the First to Third FCA Reports. It is provided

on the same basis and for the same purpose as the First to Third FCA Reports and uses

the same defined terms.

The FCA’s approach

2. The FCA's general approach to its evaluation of insurance business transfer schemes is

set out in Annex 2 to the First FCA Report and in its published guidance ‘FG 18/4: The

FCA’s approach to the review of Part VII insurance business transfers’ (“FG 18/4”).

The FCA has reviewed the Scheme for conduct issues including conduct implications

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of predominantly prudential issues. The PRA among other things reviews the Scheme

for prudential issues. We seek to avoid overlap with the review of the PRA, mindful of

the need to use our resources efficiently and effectively.

3. The matters the FCA considers and comments on include but are not limited to:

communication plan including any waivers, communications to be sent to

policyholders, link to the FCA's objectives, business rationale for the Scheme,

background regulatory issues, competition considerations, changes affecting

policyholders, ongoing regulatory requirements, objections and unresolved issues.

4. The PRA is responsible for approving the form of the Independent Expert’s Report (“IE

Report”) and the Supplementary Independent Expert Report but it must consult us

before doing so. The FCA’s review of the IE's reports aims to ensure that there has been

sufficiently detailed analysis and challenge of the Applicants’ position.

5. The FCA expects all Applicants responsible for a transfer to confirm that they have

properly taken into account the content of FG 18/4 and that the Scheme, IE reports,

witness statements, communications plan and communications are in line with that

guidance. The Applicants have in this case confirmed that is the case.

6. In making this Report, the FCA has sought to avoid unnecessary duplication of material

set out in the separate report filed by the PRA (“the Fifth PRA Report”). Accordingly,

the Court is invited to read this Report in conjunction with the Fifth PRA Report.

7. The Third FCA Report indicated at paragraph 34 that the FCA had not formed a view

as to whether or not it objected to the Scheme. The FCA now confirms that it is satisfied

that (based on the information and analysis available to the FCA) the Scheme is within

the range of reasonable and fair schemes available to the Transferor and the Transferee.

Accordingly, the FCA does not object to the Scheme.

8. The application for an Order sanctioning the Scheme has been listed for 8 November

2021. The FCA proposes to appear by Counsel at the hearing.

Developments since the Third FCA Report

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The Supplementary Independent Expert Report

9. The Independent Expert has produced a Supplementary Report dated 21 October 2021

(“the Supplementary IE Report”).

10. The FCA has reviewed and considered the Supplementary IE Report in the preparation

of this Report. The FCA does not object to the conclusions reached by the PRA in

relation to the IE Report and the Supplementary IE Report as set out in the Fifth PRA

Report at paragraph 8.

Significant FCA related issues arising in relation to the Scheme

Matters arising from the UK’s withdrawal from the EU

11. As noted in paragraph 17 of the Third FCA Report, the FCA continues to agree with

the views expressed by the PRA in paragraph 34 of the PRA’s Fourth Report on matters

arising from the UK’s withdrawal from the EU.

Operational impact of Covid-19

12. As noted in paragraphs 30 – 31 of the Third FCA Report, the FCA has considered the

operational impact of the Covid-19 on the ability of the Applicants to effect the Scheme

should it be Sanctioned by the Court.

13. Further to paragraphs 2.7 – 2.10 of the Supplementary IE Report, the FCA notes that

the Applicants have advised the IE that there have been no adverse impacts from Covid-

19 on the Applicants' abilities to administer and service their policies including those

within the scope of this Scheme.

Format of Sanction Hearing

14. The FCA notes that the Sanction hearing will take place in hybrid form, giving

policyholders and other interested parties the opportunity to attend in person or

participate remotely.

15. The FCA further notes that as described in paragraph 4.31 of the Supplementary IE

Report the Applicants will contact any objectors who wish to attend remotely but lack

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the necessary IT skills or equipment to ascertain whether they require assistance and to

provide such assistance where possible.

Notification of policyholders and affected persons and issues of policyholder

understanding

16. The FCA reviewed outgoing policyholder communications in relation to the Scheme

for clarity and ease of understanding by the policyholder and found no reason to object

to those communications.

17. The FCA notes the evidence given in paragraphs 8 to 9 of the sixth witness statement

of Paul Shallis dated 27 October 2021 ("W/S PS6") that as required by the Order of

Registrar Deputy ICC Judge Schaffer dated 23 July 2021:

17.1 Notice of the hearing date and of policyholders' (and other affected

persons') rights to make representations in writing, or to appear in person at the

hearing for sanction of the Scheme, and to have copies of the Scheme document,

was published in:

(i) The Times (including the online version);

(ii) The Financial Times;

(iii) The Daily Telegraph (including the online version);

(iv) The Sun;

(v) The Daily Mirror (including the online version);

(vi) The Daily Mail (including the online version); and

(vii) The Daily Record (including the online version).

17.2 Copies of the documentation relevant to the Scheme (other than the

Supplementary IE Report) have been available on request and on the website of

the Transferor www.pru.co.uk/annuitytransfer since 27 July 2021 (W/S PS6

paragraphs 26) and on the website of the Transferee

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https://www.rothesay.com/prudential-transaction/prudential-document-

library/since 27 July 2021.

18. The FCA also notes that per paragraphs 10 – 19 of W/S PS6, Policyholder Information

Packs were sent to Policyholders between 26 July 2021 and 1 September 2021

containing: (i) a copy of the Notice; (ii) a summary of the key features of the Scheme

and a summary of the 2021 IE Report; and (iii) a "Questions and Answers" document.

19. The FCA also notes that per paragraphs 19-21 of the Fourth Witness Statement of

Antigone Loudiadias (“W/S AL4”), a copy of the Policyholder Notification letter was

sent to New Scheme Trustees who remain policyholders of the Transferee between 26

July 2021 and 30 July 2021.

20. The FCA also notes that:

20.1 Copies of the Supplementary IE Report were sent between 22 - 27 October

2021 to all policyholders who requested a copy of the IE Report in the period to

27 October 2021, and to all policyholders who had by then objected to the

Scheme (W/S PS6, paragraph 23); and

20.2 The FCA understands that the Applicants made a copy of the

Supplementary IE Report available on the website of the Transferor

www.pru.co.uk/annuitytransfer on 21 October 2021 (W/S PS6, paragraph 27)

and on the website of the Transferee https://www.rothesay.com/prudential-

transaction/prudential-document-library/ on 21 October 2021 (W/S AL4,

paragraph 30)

20.3 The Supplementary IE Report will therefore have been available on the

website for 17 days before the sanction hearing, the FCA is satisfied that

policyholders will have had sufficient time to consider the conclusions in that

report, the principal conclusions of which have not changed from the

conclusions set out in the Scheme Report.

21. In view of the foregoing, the FCA is satisfied that the way in which communications to

policyholders have been conducted does not give it cause to object to the Scheme and

that policyholders and other persons affected by the Scheme have received sufficient

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information about the Scheme, as required by or under the Financial Services and

Markets Act (2000) (“the Act”).

Objections and Representations Received and Considered by the FCA

22. The notice to policyholders and other affected persons requested that representations in

writing and written indications of proposed submissions to the court be sent to the

relevant Transferor or Transferee.

23. The FCA has received from the Applicants and has reviewed, management information

and summaries of the responses received from policyholders. The FCA has in

particular reviewed (a) copies or transcripts of communications received by the

Applicants that the Applicants determined were objections to the Scheme; and (b)

copies or transcripts of the Applicants’ response to those communications.

24. As at 27 October 2021 the FCA understands that the Applicants have received 1,121

policyholder communications by telephone and 235 letters in response to the

communication exercise. Out of all the communications, the Applicants identified

1,374 responses as objections. A number of policyholders wrote directly to the FCA

about the Scheme. These representations where mainly about the FCA role in relation

to a Part VII transfer.

25. The Annex to this Report sets out the main issues raised by the objections and

representations (grouped under general headings). For ease of reference, the Annex

sets out the response of both the FCA and the PRA to each category of main objections

or representations. The same annex is attached to the Fifth PRA Report as Annex II.

26. The FCA has considered and does not object to the views expressed by the Independent

Expert about the objections and communications received, set out in the Supplementary

IE Report, at paragraphs 4.55 – 4.56.

27. Based on its consideration of the substance of the objections, views and representations

contained in the correspondence received and as set out in the Annex, the FCA is

satisfied that the material received in response to the communication exercise does not

give the FCA reason to object to the Scheme.

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28. The FCA understands that 16 Transferring Policyholders have, at some stage (including

in early 2019) indicated an interest in attending. So far, 6 Transferring Policyholders

have confirmed that they intend to attend, and none have confirmed they intend to

appear by Counsel at the hearing of the application for an order sanctioning the Scheme.

The FCA is also aware that a person who claims to be affected by the Scheme has

indicated an interest in attending.

The FCA's Decision

29. Based on the information and considerations set out in the Third FCA Report and this

report, the FCA is satisfied that the Scheme is within the range of reasonable and fair

schemes available to the Transferor and Transferee. Accordingly, the FCA does not

object to the Scheme.

_________________________________

Glenn Redemann

Manager, Banking, Payments and Insurance Department

Dated 29 October 2021

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ANNEX I

Objections received

Due to the high volume received, the objections received have been broken down into the categories

below as identified by the PRA and the FCA. The PRA and FCA views address the main themes within

each of these categories.

Issue 1: Affiliation with the Transferor

Description of the Issue: Policyholders have a strong affiliation with the Transferor due to their views

as to its strength, history, trustworthiness and reputation as well as policyholders' previous experience

with the Transferor, and therefore object to the transfer to the Transferee.

PRA view:

The PRA's position on consideration of the reputation and venerability of the Transferor and Transferee

are as set out in paragraphs 27 to 30 of this Report. Both the Transferor and Transferee are subject to

the same regulatory regime – Solvency II. The Transferor's and Transferee's pre- and post-scheme

Solvency II Pillar 1 financial positions remain above Solvency II requirements. Additionally, the

economic impact of this transfer of risk has largely already occurred following the completion of the

Reinsurance Agreement in March 2018 as set out in paragraph 23 of this Report.

The PRA also notes the comments of the Independent Expert in paragraphs 8.194 and 13.36 of the

2021 Scheme Report:

"I am satisfied that the implementation of the Scheme will not have a material adverse impact

on the security of benefits under the Transferring Policies, the reasonable expectations of the

transferring PAC policyholders or the service standards and governance applicable to the

Transferring Policies. Therefore, I have no reason to believe that the transferring policyholders

will have a materially different experience as Rothesay policyholders than they would have

done if they remained as PAC policyholders. While I fully understand why many PAC

policyholders draw comfort from the company's reputation, in reviewing the security of

policyholders' benefits I have necessarily considered more tangible factors such as solvency

cover, risk exposure and capital management policies. Additionally, the Appeal Judgment noted

that age and reputation are not relevant factors in relation to transfers of this type. "

The PRA has considered whether this issue has a material impact on the PRA's statutory objectives

and has concluded that it does not.

Accordingly, the PRA is satisfied that this is not a matter that should cause it to object to the Scheme.

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FCA view:

The FCA reviewed the policyholder objections and the Transferor’s responses. The FCA further notes

the PRA’s views set out above and in the paragraphs 27 to 30 of this Report and the conclusions of the

Independent Expert in the reports referenced in this Annex. Additionally, the FCA notes that both the

Transferor and Transferee are subject to the same regulatory regime. The FCA’s view is that the

Transferor has provided a satisfactory response to the policyholder concerns.

Given the above, the FCA is satisfied that the issues detailed under Issue 1 will not cause it to object to

the Scheme.

Issue 2: Perception of the Transferee

Description of the Issue: Policyholders have a negative perception of the Transferee and therefore

object to the Scheme. These include:-

(i) negative perceptions on the financial strength and track record of the Transferee, with one

policyholder requesting a statement of the monies that are to be transferred to the Transferee

along with their annuity as well as an explanation of why the capitalisation average (which

is understood by the Independent Expert to be the total Solvency II Best Estimate Liabilities

(BEL) of the annuity book divided by the total number of annuities in force) was higher in

the Transferee compared to the Transferor;

(ii) negative experience with the Transferee in the past;

(iii) concerns about the level of service post-transfer;

(iv) concerns about personal details to be shared with the Transferee;

(v) concerns that the Transferee is a Scottish company and the annuity may be at risk should

Scotland become independent from the UK;

(vi) concerns that the Transferee has a larger reliance on the US and the risk that exposure to

the American market brings; and

(vii) concerns about being exposed to a company with a less favourable credit rating than the

Transferor.

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PRA view:

In relation to point (i), as noted in the PRA's comments concerning Issue 1 (above) and Issue 4 (below),

the PRA does not have any material concerns about the Transferee's financial strength and track record.

As regards the specific request made by a policyholder regarding the amount of monies transferred in

respect of their annuity policy, the PRA notes the comments made by the Independent Expert in

paragraph 4.34 of his Supplementary Report that no such monies will be transferred from the Transferor

to the Transferee on implementation of the Scheme due to the Reinsurance Agreement that is already

in place, and that in line with normal industry practice, there is no separate fund kept for an individual

annuity policy and so this information is not available. In respect of the difference in Solvency II BEL

per annuity between the Transferee and Transferor, the PRA does not consider this to be an appropriate

metric to consider financial strength of a firm and concurs with the Independent Expert’s view in

paragraph 4.34 of his Supplementary Report that this is likely to reflect differences in the profile of the

Transferor and Transferee’s annuity portfolios, such as average annuity size and average annuitant age.

In relation to points (ii) and (iii), the PRA's review of the Scheme is focussed on prudential matters and

the objections raised do not appear to highlight any deficiencies relevant in that regard. The PRA also

notes the comments of the Independent Expert in section 7, paragraph 13.30 and paragraphs 13.38 to

13.41 of the 2021 Scheme Report that the administration services for Transferring Policies will be

provided by the Transferor for a period of approximately 6 to 12 months after the targeted effective

date of 15 December 2021. The PRA further notes that, in paragraphs 2.4 to 2.6 of the 2021

Supplementary Report, the Independent Expert has considered the Transferee's plans to migrate the

administration and servicing of the Transferring Policies to Capita Employee Solutions. The

Independent Expert has reviewed the target service standards for annuities that the Transferee manages

and administers and has found those standards to be reasonable. The PRA also notes the FCA’s views

below that, as part of its ongoing regulatory relationship with the Transferee will continue to monitor

the progress of this migration. The Independent Expert has also concluded that the Transferee's Board

is experienced in the management and governance of non-profit annuity business. In relation to point

(iv), the Independent Expert has set out in paragraph 13.45 of the Scheme 2021 Scheme Report that

the Transferor's Data Protection Notices permit the Transferor to share policyholder details when

necessary with its Business Partners, which include service providers and reinsurers. The Scheme also

states that the Transferee will become the data controller. In relation to point (v), the Independent

Expert has set out at paragraph 4.39 that the Transferee's registered office is in London and it does not

have a presence in Scotland.

Regarding point (vi), the Independent Expert has noted at paragraph 4.42 of the 2021 Supplementary

Report, that page 19 of the Transferee's 2020 Annual Report discloses that 20% of the Transferee's

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investments are held in the US. It is the Independent Expert's view that it is normal for UK insurers to

invest in high quality assets denominated in other currencies, and arguably such investments can

contribute to greater resilience as they ensure that the Transferee's asset exposure is not overly

concentrated in a single geographical location. The Independent Expert also notes at paragraph 4.43

that one of the Transferee's institutional shareholders is a US based mutual insurance company,

however in his view the identity of the Transferee's shareholders is not a consideration for the

Independent Expert in a Part VII transfer except to the extent that it may affect the Transferee's ability

to seek additional capital in the future should it need to do so. The Independent Expert has addressed

this point in paragraph 8.95 of the 2021 Scheme Report, noting specifically that the shareholder is

likely to have a low appetite for the type of reputational damage that could ensue if the Transferee were

to fail.

The PRA view is that whilst investment decisions are a matter for individual insurers and whilst there

is no suggestion, at present, that the Transferee's investments in the US are unreasonable or may have

an impact upon factors such as security of policyholder benefits, the PRA reviews investment mixes

as part of its supervision, and changes to the shareholdings in the Transferee will be subject to

regulatory approval through the change of control regime in the Act.

In relation to point (vii), the Independent Expert has also noted at paragraphs 4.46 to 4.49 of the 2021

Supplementary Report that the Transferor and Transferee have been assigned credit ratings of Aa3 and

A3 respectively by Moody's, and credit ratings AA- and A+ respectively by Fitch. Additionally, the

Transferor and Transferee have been assigned a rating of A+ by Standard & Poor's. The Independent

Expert also noted that:

"In my view the most relevant measure of financial strength from the perspective of a

policyholder is that provided for by the strength of the regulatory solvency regime,

supplemented by the insurer's capital management policy. I have examined this in detail for

both Companies in my 2021 Scheme Report and in this 2021 Supplementary Report, and have

concluded that the transfer would not have a material adverse effect on the security of benefits

under the Transferring Policies."

"Moreover, one of the barriers to a stronger credit rating for the Transferee is likely to be the

fact that Rothesay has issued a number of tranches of debt and as described in paragraph 2.34

the Transferee Issued a further tranche of debt dated 6 October 2021. As described in

paragraph 6.37 of the Scheme Report, interest and principal repayments on these debt

instruments rank below obligations to Rothesay's policyholders, and in particular can be

deferred or cancelled if Rothesay's SCR Coverage Ratio falls below 100%, and therefore from

a policyholder security perspective these payments could not be made if to do so would affect

Rothesay's ability to meet its obligations to its policyholders….the SCR that Rothesay is

required to hold under Solvency II will reflect the risk profile of the company and its business,

including requiring a higher SCR where there is a lower level of risk diversification"

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As stated in paragraph 20 of this Report, the PRA does not generally base its assessment of a scheme

upon a direct comparison of the Transferor and Transferee. Notwithstanding, the difference in credit

ratings is not one which the PRA considers should affect its assessment of the Scheme.

The PRA has considered whether these issues have a material impact on the PRA's statutory objectives

and has concluded that they do not.

Accordingly, the PRA is satisfied that these are not matters that should cause it to object to the Scheme.

FCA view:

The FCA has reviewed and considered the respective responses relayed to the policyholders and the

views of the Independent Expert. The FCA notes the position of the PRA as set out above with regard

to point (i) and concurs with this position.

In relation to points (ii) and (iii), the FCA has reviewed and considered the respective responses relayed

to the policyholders and the views of the Independent Expert. The FCA notes the position of the PRA

as set out above in relation to points (ii) and (iii) and concurs with this position. In addition, the FCA

will continue to monitor the service performance of the Transferee as part of ongoing supervisory

engagement.

In relation to points (iv) and (v) of Issue 2, the FCA notes the position of the PRA as set out above in

relation to points (iv) and (v) and concurs with this position.

In relation to Issue 2, point (vi) and (vii), The FCA notes the position of the PRA as set out above in

relation to points (vi) and (vii) and concurs with this position.


the Scheme.

Issue 3: Increased inconvenience and cost for policyholders

Description of the Issue: Policyholders have multiple policies with the Transferor but not all of their

policies are transferring and therefore they have expressed concern about the inconvenience of having

two counterparties to manage. One policyholder resides outside of the UK and expressed concern

regarding the cost of communication. A policyholder also expressed concern about the costs and time

associated with reading documentation related to the transfer.

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PRA view:

The PRA notes the Independent Expert's comments that the transferring policyholders will not be

subject to material inconvenience as a result of having two counterparties to manage. In particular, they

are not required to take any action in relation to the transfer and each policyholder's payment benefits

will continue to be paid into the policyholder's nominated account after the transfer (see paragraph

13.31 of the 2021 Scheme Report). The PRA also notes the views of the FCA below.

The PRA has considered whether this issue has a material impact on the PRA's statutory objectives and

has concluded that it does not as the contractual obligations of the Transferring Policies are not expected

to be affected.


FCA view:

The FCA notes the Independent Expert's comments in paragraph 13.31 of the 2021 Scheme Report that

the transferring policyholders will not be subject to material inconvenience as a result of having two

counterparties to manage. The Independent Expert notes that policyholders are not required to take any

action in relation to the transfer and their payment benefits will continue to be paid into the

policyholder's nominated account after the transfer.

The Independent Expert has also considered the burden of engaging with the proposals at paragraph

4.50 of the 2021 Supplementary Report and while acknowledging that a full review of all materials

would be onerous, considers this is not an issue relevant to whether the scheme is sanctioned. The FCA

has reviewed policyholder communications and is satisfied they do not give it grounds to object to

sanction of the scheme.


the Scheme.

Issue 4: Security of benefits of policyholders

Description of the Issue: Policyholders have expressed concerns about the security of their benefits.

Primarily, policyholders have raised preferences to remain with the Transferor as the policyholders

opted to have annuities with the Transferor for a number of reasons including due to size, longevity

and customer service. A concern has also been raised that the transfer capital sum in respect of the

annuity contracts could be exhausted within approximately a decade as a result of fees charged by the

Transferee.

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PRA view:

The PRA notes that the Independent Expert has concluded, at paragraph 14.1 of the 2021 Scheme

Report, and confirmed at paragraph 6.2 of the 2021 Supplementary Report, that the Scheme will not

have a material adverse effect on the security of benefits of the policyholders of the Transferor or

Transferee, including the Transferring Policyholders, or their reasonable benefit expectations. The

PRA does not consider that conclusion to be unreasonable.

The PRA has considered the relevance of factors such as size, venerability and group support in

paragraphs 27 to 30 of this Report and under Issue 1 above and Issue 7 below.

It is also important to emphasise – in line with the Independent Expert’s conclusions in paragraphs

8.147 to 8.161 of his 2021 Scheme Report – that there will be no changes to the annuities payable

under the Transferring Policies as a result of the Scheme. As set out in paragraph 8.159 of the 2021

Scheme Report, the Independent Expert also does not consider that commutation terms available to

the Transferring Policyholders will result in a material adverse effect on the reasonable benefit

expectations.

As to the specific matters raised on the impact of fees on the security of policyholder benefits, it is

important to emphasise the Independent Expert’s explanation at paragraph 4.34 of the 2021

Supplementary Report that the amount transferred upon the inception of the Reinsurance Agreement

in 2018 is not gradually drawn down upon with annuity payments ceasing if this fund is exhausted.

Instead, the Transferee is contractually required to continue to meet the annuity payments in full and

must hold the relevant liabilities and capital requirements in respect of this business as set out in

Solvency II.


has concluded that it does not.

Accordingly, the PRA is satisfied that these are not matters that should cause it to object to the

Scheme.

FCA view:

The FCA notes the Independent Expert’s comments and conclusions pertaining to Issue 4 as set out in

Section 8 and paragraphs 8.147 to 8.161 of the 2021 Scheme Report, and in paragraph 3.45 of the 2021

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Supplementary Report and also the Transferor’s responses to the policyholders and the views of the

PRA as set out above and in paragraphs 27 to 30 of the this Report.


the Scheme.

Issue 5: Compulsion to transfer

Description of the Issue: Policyholders expressed concerns that their contracts with the Transferor are

not being honoured and that they did not give their permission to the transfer and therefore should

have the option to opt out or transfer their policies to another insurer. Policyholders have also raised

concerns that the costs associated with the transfer are being paid by the policyholders and that there

has not been sufficient justification of the selection of Transferring Policies.

PRA view:

The Independent Expert has set out at paragraph 13.28 of the 2021 Scheme Report that there is no

legal mechanism for policyholders to transfer their policies if not explicitly permitted by the policy's

terms and conditions. The Scheme does not change any terms and conditions such that policyholders

of Transferring Policies can transfer or cash in their policies. However, the PRA notes the comments

of the Independent Expert at paragraphs 13.23 and 13.26 in the 2021 Scheme Report that the Court

will determine whether the Scheme is fair to policyholders under the Act, and that there is no

requirement for insurance companies to make policyholders aware in advance that their policies could

transfer to another organisation. The PRA notes that, pursuant to Part VII of the Act firms are permitted

to transfer their insurance business without seeking the consent of individual policyholders, subject to

the provisions and safeguards in the Act.

The PRA notes the comments of the Independent Expert at paragraphs 12.43 and 12.44 in the 2021

Scheme Report, that the Transferor and Transferee will each bear the cost of notifying their own

policyholders and the costs of the Independent Expert's fees, Court fees and Counsel fees will be shared

between the parties. Costs associated with the Scheme will be met from the Transferor's shareholder

funds or the Transferee's shareholder funds and therefore not borne by policyholders. The Independent

Expert has also explained at paragraph 7.35 of the 2021 Scheme Report that the Transferring Business

was selected in order to achieve a target level of capital release to support a demerger, and at paragraph

13.44 of the 2021 Supplementary Report that choosing the Transferring Policies on the basis of

commercial, practical and legal considerations was considered reasonable.

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FCA view:

The FCA have reviewed and considered the respective responses relayed to the policyholders.

The FCA notes the position of the PRA as set out above in relation to Issue 5 and concurs with this

position. Given the above the FCA is satisfied that the issues detailed under Issue 5 will not cause it to

object to the Scheme.

Issue 6: Ongoing dispute or issue with the Transferor

Description of the Issue: Policyholders raised objections against the Transferor including concerns that

following the transfer they will no longer be in scope for the Transferor's Thematic Review of Annuity

Sales Practice (TRASP) review.

PRA view:

The PRA notes that the statement as set out in paragraph 24 of the First Witness Statement of Paul

Shallis the Transferor will continue to be responsible for the TRASP Past Business Review if it is not

completed by the transfer date. If a lump sum compensation payment is required to be paid, this will be

paid by the Transferor, although the Transferor may request that the Transferee makes this payment as

the Transferor's paying agent. The First Witness Statement of Paul Shallis also stated that if

augmentation of an existing annuity payment is required, the Transferor will notify the Transferee and

the Transferee will set up and pay the augmented annuity payment, following the payment of a premium

from Transferor to the Transferee. The PRA also notes paragraph 7.30 in the 2021 Scheme Report,

which states that "the Transferor has agreed to pay additional reinsurance premiums to the Transferee

to effect the inclusion of the increase to the annuity amounts arising from the TRASP Incremental

Liabilities within the scope of the Reinsurance Agreement. Therefore, the time the Scheme is

implemented the Transferee will be responsible, under the Reinsurance Agreement, for meeting the full

annuity amount of all Transferring Policies, including any TRASP Incremental Liabilities, and will

remain responsible for this after the implementation of the Scheme ".




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FCA view:

The FCA notes the position of the PRA as set out above in relation to Issue 6 and concurs with this

position.

The FCA further notes that under Clauses 4.1 – 4.5 of the Scheme actions taken against the Transferor

can be continued against the Transferee should the Scheme be sanctioned by the Court and become

effective. The FCA is the conduct regulator of both Applicants and will expect both to treat their

customers fairly in this regard in line with its Principle 6.


the Scheme.

Issue 7: Transferee's financial strength after the proposed transfer

Description of the Issue: A person who considers that they may be adversely affected by the Scheme

has objected that the risk of either Applicant needing external support in the future is not remote, that

there is a material disparity between the external support potentially available for each of the Transferor

and the Transferee and that there is a significantly greater uncertainty risk in respect of the Transferee

than there is in respect of the Transferor; the person considers further that, in respect of the Transferee,

there is an unacceptable level of uncertainty. This objection has also been raised by a few policyholders.

PRA view:

The PRA in its assessment of the Scheme did not attach any weight to the availability (or lack of

availability) of support from other sources and did not consider that this gave it reason to object to the

Scheme. This was on the basis that the Scheme was not expected to threaten either the Transferor or

Transferee's ability to meet its SCR and capital management policies and that there was nothing to

suggest any imminent deterioration in the Transferee's balance sheet such that group support would be

required.

The PRA's focus in its assessment of Part VII schemes is upon the Transferor and Transferee (although

it will have regard to such support where there is a binding commitment). In general, as part of its

broader supervisory role, the PRA will consider the availability of external support but will again only

attach significant weight to such support where there is a binding commitment, its view being that in

the absence of such a commitment the benefit of such support is uncertain and unquantifiable.

18

The Court of Appeal's judgment in the present case1 also noted that the High Court judgment in 2019:

"…ought not to have concluded that there was a material disparity between the non-contractual

external support potentially available for each of the Applicants. In any event, such a disparity

was not a material factor. Moreover, adequate weight was not accorded to the expert's

conclusion that the risk of the [Transferee] or [Transferor] needing external support in the

future was remote, to the Regulators' lack of objection to the Scheme, and to the continuing

future regulation of the Transferee.”




FCA view:

The FCA reviewed the policyholder objections and the Transferor’s responses. The FCA further notes

the PRA’s views set out above and the conclusions of the Independent Expert in the 2021

Supplementary Report referenced in this Annex. The FCA’s view is that the Transferor has provided

a satisfactory response to the policyholder concerns.


the Scheme.

Issue 8: The Transferee's use of the Matching Adjustment (MA) and Transitional Measure on

Technical Provisions (TMTP)

Description of the Issue: Some policyholders have expressed concerns that the Transferee has

materially greater reliance on the MA than the Transferor and has queried what the SCR Coverage

Ratio of the Transferee would be in the event that MA were set to zero and no TMTP recalculation

were assumed.

Similar concerns have been expressed by an individual who considers they are adversely impacted by

the Scheme.

PRA view:

1 At paragraph 132.

19

The MA and the TMTP are both long-term guarantees measures that form part of the UK Solvency II

regulatory regime, and the Transferee and Transferors' use of these are subject to PRA approval and

ongoing supervision.

The Independent Expert sets out the impact of the MA on the Solvency II balance sheets of the

Transferor's shareholder-backed business and the Transferee at paragraphs 3.27 to 3.31 of his 2021

Supplementary Report. The figures quoted by the Independent Expert (based on information and

calculations provided by the firms) are as follows:

(i) The Transferee's Solvency Coverage Ratio as at 30 June 2021 was 204%. The Solvency

Coverage Ratio of the Transferor's shareholder-backed business as at 30 June 2021 was

182%.

(ii) The Transferee's Solvency Coverage Ratio would have been 17% as at 30 June 2021 if

the MA was set at zero with no TMTP recalculation. The Transferor's Solvency

Coverage Ratio as at 30 June 2021 would have been 92% if the MA was set at zero

with no TMTP recalculation. However, the PRA notes here the caveats in the IE's 2021

Supplementary Report as to differences in how these numbers have been calculated in

the notes to Tables 3.6 and 3.7.

The PRA notes here that, as explained in paragraph 20 of this Report, the PRA does not base its

assessment of the Scheme upon a direct comparison of the Transferor and Transferee. Instead, it

considers the effect of the proposed Scheme on each of the Transferor and Transferee.

Further, and as regards the wider points on the Transferee's use of the MA, the PRA has considered

whether this issue has a material impact on the PRA's statutory objectives and has concluded that it

does not.

Solvency II provides that insurers matching certain long-term liabilities, such as annuities, with assets

that they can hold to maturity may seek regulatory approval to value these liabilities using a MA. The

MA is relevant both to the way in which insurers value certain long-term insurance liabilities and

(through that valuation) to the amount of capital they must hold in order to withstand a 1-in-200 year

stress. The MA allows a firm to value its insurance liabilities using a discount rate that is higher than

the risk-free rate. It is generally the case that the MA has the effect of reducing both the value of the

insurance liabilities and the SCR and so increases a firm's solvency ratio. The Independent Expert

explains the operation of the MA in paragraphs 4.28 to 4.32 of his 2021 Scheme Report, and sets out

how the MA impacts on the solvency position of an insurer in paragraph 8.13.

20

The MA is an integral part of the Solvency II framework. As noted above, its use is subject to regulatory

approval and firms with approval to use the MA are required to comply with ongoing eligibility criteria,

including around ensuring that their assets and liabilities are appropriately matched. Firms' use of the

MA is also closely supervised and the PRA has published a number of Supervisory Statements setting

out its expectations regarding the MA234. All else being equal, firms with larger MA portfolios will

obtain a greater benefit (as an absolute monetary amount) from applying the MA. However, the extent

to which the MA is used by a particular firm is not a direct indicator of the financial strength of that

firm either in isolation or relative to its peers.

For completeness, and as noted in paragraphs 39 to 48 of this Report:-

(i) The PRA and HM Treasury are currently considering whether changes to the MA

should be made as part of the Solvency II review. However, no decisions have yet been

made and any changes would be subject to public consultation as part of a wider

package of potential reforms and managed appropriately.

(ii) The PRA considers the principle underlying the MA - that long-term investors that

match their assets closely to their long-term liabilities are exposed to fewer risks – is

sound, and recognises that firms that meet the relevant Solvency II requirements are

entitled to use the MA when determining their regulatory solvency position.

(iii) The PRA has assessed the Scheme against the current regulatory regime as set out in

Solvency II, including the treatment of MA under Solvency II and considers that it

would be inappropriate for it to seek to assess the Scheme on any other basis (even

assuming that any other basis could be identified).




FCA view:

The FCA reviewed the policyholder objections and the Transferor’s responses in relation to the use of

the Matching Adjustment. The FCA further notes the PRA’s views set out above and the conclusions

2 SS7/18 - Solvency II: Matching Adjustment 3 SS8/18 – Solvency II: Internal models – modelling of the matching adjustment 4 SS3/17 – Solvency II: Illiquid unrated assets (updated April 2020)

21

of the Independent Expert in the 2021 Scheme Report referenced in this Annex. The FCA’s view is

that the Transferor has provided a satisfactory response to the policyholder concerns.


the Scheme.

Issue 9: Financial Services Compensation Scheme (FSCS)

Description of the Issue: There have been objections raised by a policyholder that in the event of default

by an insurer, the availability and extent of compensation from the FSCS would be dependent on the

way in which the insolvency proceedings were conducted as the Insolvency Practitioner will have the

ability to determine the value attributable to a policy. The policyholder has also referenced the

Insolvency Act 1986 section 315(2)(a) "unprofitable contracts disclaimer" and the Insurers (Winding

Up) Rules 2001 (Schedule 2), where the policyholder refers to text "there shall be determined…".

There have also been objections raised by a person who considers that they may be adversely affected

by the Scheme. The person considers that, given the Transferee's use of the Matching Adjustment, this

may create a risk to the resources of the FSCS. The person considers that if a large firm such as the

Transferee becomes insolvent and makes a large call on the FSCS, it is in their view unlikely that the

cost could be met without a significant increase in future life insurance premia.

PRA view:

The PRA notes the view of the Independent Expert in paragraph 12.70 of the 2021 Scheme Report that

the implementation of the Scheme will not adversely affect eligibility for compensation from the FSCS

for any transferring or non-transferring policyholders of the Transferor or for the existing policyholders

of the Transferee. The PRA notes further that the Independent Expert has stated at paragraph 4.45 of

the 2021 Supplementary Report that his conclusions in section 6 of the 2021 Supplementary Report

and Section 14 of the Scheme Report do not depend on the availability of the FSCS either before or

after implementation.

The PRA also notes the views of the Court of Appeal as set out in its judgment in the present case5:

“Under this issue, some argument was addressed to the question of whether the judge had been

right at [155] to say that the availability to policyholders of the FSCS was irrelevant when the

court was asking whether the Scheme would make a material change in the security of benefits

for policyholders. This was not a ground of appeal, so the court is not strictly obliged to deal

5 At paragraph 108.

22

with the point. Nonetheless, we cannot see how the FSCS could have been relevant to what the

judge had to decide in this case. The FSCS is a scheme of last resort, and is applicable equally

to the holders of Transferring Policies before and after the transfer. As the judge suggested, if

the existence of 100% protection for policyholders were a crucial factor, it would be hard to

see why the expert needed to undertake a detailed analysis of the respective financial strengths

of the transferor and transferee companies.”

In any event, the PRA does not have any material concerns in relation to the Transferee’s ability to

meet its obligations to policyholders. Further, the PRA’s views on the Transferee’s use of the MA are

set out under Issue 8 above.




FCA view:

The FCA reviewed the policyholder objections and the Transferor’s responses in relation to the FSCS.

The FCA further notes the PRA’s views set out above and the conclusions of the Independent Expert

in the 2021 Supplementary Report referenced in this Annex. The FCA’s view is that the Transferor

has provided a satisfactory response to the policyholder concerns.


the Scheme.

Issue 10: Transferee's use of debt to support its capital base

Description of the Issue: A policyholder has raised concerns that the Transferee's Holding Company

has large amounts of subordinated debt compared to reported capital.

PRA view:

As stated in paragraph 30 of this Report, the PRA has not attached weight to the group membership or

group arrangements of the Transferor and the Transferee. Instead, the PRA has evaluated the strength

of each of the Transferor and Transferee, based on each firm's balance sheet and how it compares to

the size and nature of the liabilities insured, each firm's ability to meet its capital requirements and the

likelihood of each firm facing difficulties in stress scenarios, both prior to and following the

implementation of the Scheme.

23

In assessing the adequacy of a firm's financial resources, the PRA will have regard to the quality of

capital and its eligibility to be used for the purposes of meeting the firm's SCR. There are requirements

set out in Solvency II around quality of capital and the extent to which different tiers of capital can be

used to cover the SCR, which apply to both the Transferor and Transferee.

Following the Transferee's sterling issuance on 6 October 2021, the Transferee issued a further $400m

restricted tier 1 instrument on 20 October 2021. Due to the timing of the announcement this US dollar

issuance is not referenced in the 2021 Supplementary Report. The latest issuance is estimated by the

Transferee to have increased its SCR coverage by approximately 6%. This information does not alter

the PRA's assessment of the Scheme, as the proportion of restricted items to Tier 1 own funds remains

within Solvency II limits.




FCA view:

The FCA reviewed the policyholder objections and the Transferor’s responses in relation to the

Transferee’s use of debt to support its capital base. The FCA further notes the PRA’s views set out

above and the conclusions of the Independent Expert in the 2021 Scheme Report referenced in this

Annex. The FCA’s view is that the Transferor has provided a satisfactory response to the policyholder

concerns.

Given the above, the FCA is satisfied that the issues detailed under Issue 10 will not cause it to object

to the Scheme.

Issue 11: Transferee's investments in lifetime mortgage assets and assets linked to ground rent on

leasehold properties

Description of the Issue: There have been objections raised around the Transferee's exposure to

property related loans and whether the PRA may apply more restrictive rules around the valuation and

capital management of equity release mortgages. Concerns have also been raised about the risk of

assuming all asset classes will grow at the risk-free rate. There have also been objections raised

regarding the Transferee's investments secured by ground rents and how any devaluations of such

investments have affected the Transferee's capital position.

PRA view:

24

The PRA notes that the Independent Expert stated that the Transferee's lifetime mortgage portfolio

totalled £4.3bn as at 31 December 2020 in paragraph 8.129 of the 2021 Scheme Report. He then went

on to explain the nature and operation of lifetime mortgage assets before concluding in paragraph 8.139

that the Transferee's "exposure to lifetime mortgages will not have a material adverse effect on the

security of benefits under Transferring Policies". More recently, the Transferee agreed to purchase a

portfolio of lifetime mortgages from Just Group plc ("Just Group") for a consideration of £334 million.

The Independent Expert concluded at paragraph 2.32 of the 2021 Supplementary Report that "given

that it represents less than 1% of Rothesay's total assets, and increases Rothesay's lifetime mortgage

portfolio by less than 10%, I do not consider that the transaction with Just Group materially affects

Rothesay's risk exposures."

The Independent Expert concluded in paragraph 8.127 of the 2021 Scheme Report that the size and

nature of the Transferee's exposure to ground rent-linked investments at 31 December 2020, and the

quantum of the potential impact of leasehold reform, did not give rise to concerns that the Transferor's

exposure to the risks associated with ground rent-linked investments will have a material adverse effect

on the security of benefits under the Transferring Policies.

The PRA notes that UK insurers are subject to a prudential regulatory requirement to invest assets

covering their insurance liabilities in a manner appropriate to the nature and duration of those insurance

liabilities. Assets backing long duration insurance liabilities would therefore be expected to reflect both

the duration of those liabilities and the regular payments required to be made to policyholders (annuity

payments are typical such liabilities).

The PRA does not comment on the specific treatment of assets held by particular firms. However, for

assets such as lifetime mortgages and ground rents where there is a lack of market price data and the

assets are valued and rated internally by firms, the PRA will consider the appropriateness of the

assumptions made by firms as part of its supervisory activity.

The PRA is aware of the ground rent reforms and takes any developments in this area into account its

supervisory assessment of firms' investment strategies. The Independent Expert has also noted that

"given the size and nature of the Transferee's exposure to ground-rent linked investments as at 31

December 2020 and the quantum of the potential impact of the Leasehold Reform, I am satisfied that

the Transferee's exposure to the risks associated with ground-rent linked investments will not have a

material adverse effect on the security of benefits under the Transferring Policies." The Independent

Expert also stated that he is not aware of further material developments in this area at paragraph 4.34

of the 2021 Supplementary Report (the final bullet point).

25




FCA view:


Transferee’s investment in lifetime mortgage assets and assets linked to ground rent on leasehold

properties. The FCA further notes the PRA’s views set out above and the conclusions of the

Independent Expert in the 2021 Supplementary Report referenced in this Annex. The FCA’s view is

that the Transferor has provided a satisfactory response to policyholder’s concerns.


to the Scheme.

Issue 12: Transferee: divestment by Goldman Sachs and Blackstone

Description of the Issue: Some policyholders have expressed concerns over the stability of the

Transferee's ultimate investor base given that two shareholders (Goldman Sachs and Blackstone) have

divested their stakes in recent years.

PRA view:

The PRA notes that no changes in the ultimate ownership of the Transferee has had any impact on the

Transferee’s regulatory solvency position. This is supported by the conclusions of the Independent

Expert at paragraph 13.65 of the 2021 Scheme Report.




FCA view:


Transferee’s divestment of Goldman Sachs and Blackstone. The FCA further notes the PRA’s views

set out above and the conclusions of the Independent Expert in the 2021 Scheme Report referenced in

26

this Annex. The FCA’s view is that the Transferor has provided a satisfactory response to the

policyholder concerns.


to the Scheme.

Issue 13: Transferor's practices and standards in relation to customer service, customer

communications and internal record-keeping

Description of the Issue: A policyholder has raised concerns that some individuals employed by the

Transferor with whom the policyholder was corresponding did not have the authority to act on behalf

of the Transferor; around the completeness of the Transferor's internal record-keeping in relation to

individual policies and associated terms and conditions; and, around poor customer service standards

provided by the Transferor and its outsourced service provider. Another policyholder has also raised

concerns that information has been withheld regarding the number of annuitants who died from Covid-

19.

PRA view:

The PRA notes the views of the FCA below, and further notes the Independent Expert’s confirmation

that these points are not concerning whether the Scheme has an impact on the policyholder (excepting

for whether the Transferee is likely to receive adequate policy documentation to pay the correct annuity

amounts and he concluded at paragraph 13.62 of the 2021 Scheme Report that this is likely to be the

case).




FCA view:

The FCA has considered the views of the Independent Expert on this issue. The FCA is satisfied that

the Transferee will have sufficient information in the event that the Scheme is sanctioned to be able to

make annuity payments to transferring policyholders.

The Transferor and Transferee will continue to be subject to supervision by the FCA and any issues

relating to poor customer services standards post-transfer will be dealt with as part of ongoing FCA

supervision.

27


to the Scheme.

Issue 14: Policyholder documentation

Description of the Issue: A policyholder has raised some concerns about apparent shortcomings in the

documentation of their annuity, and has asked whether this creates a risk either that the existing

entitlements will not be transferred in full under the Scheme, or that the Transferee will not have

sufficient information on those entitlements to be able to administer the annuity.

PRA view:

The PRA notes that the Transferor has investigated this issue and sought legal advice on whether the

Scheme can operate as intended. The Scheme document provides the legal contractual mechanism by

which rights and obligations are transferred. The legal advice received by the Transferor is that the

Scheme will transfer all policyholder contractual rights, because the wording of the Transfer Scheme

refers to the existing rights, rather than specific documents, which ensures that existing entitlements

will be fully replicated in the Transferee. The Independent Expert has also considered this issue and

reviewed this advice, and considers that "relevant documents provided do specify sufficiently clearly

what the rights and benefit entitlements of annuitants." The Independent Expert concludes "by

referring to the annuitant’s existing rights, rather than specific documents, the wording of the Scheme

ensures that existing entitlements will be fully replicated in the Transferee" (see paragraphs 4.6 – 4.18

of the 2021 Supplementary Report). The Transferee has also agreed with the legal advice.

The PRA notes the views of the FCA, and is satisfied that the Transferor has taken reasonable steps to

consider and seek advice on this issue, and that this issue has been considered by the Independent

Expert, but that ultimately the issue of whether the Scheme can operate as intended is a matter for the

Court to consider.




FCA view:

The FCA has considered the points raised under Issue 14. The FCA notes the legal advice obtained by

the Transferor and the Independent Expert’s conclusions set out in paragraph 4.6 – 4.18 of the 2021

Supplementary Report. The FCA is satisfied that this issue does not give it cause to object to the

28

Scheme but expects that the Transferor to address any similar discrepancies in policyholder

documentation.

Issue 15: Servicing of EEA policies

Description of the Issue: A policyholder raised concerns whether policies could be serviced in EEA

jurisdictions.

PRA view:

The Transferor has not identified any policies where a policyholder was resident in an EEA jurisdiction

at the time of policy inception, though the Transferor cannot state conclusively that no such policies

exist. The Transferor has identified a number of policyholders that have EEA addresses where

policyholders were likely resident in the UK at the time of policy inception and likely migrated.

The Independent Expert has referred to EIOPA Recommendations for the insurance sector in light of

the United Kingdom withdrawing from the European Union, particularly Recommendation 6, which

notes that EEA Member States should recognise such policies as having been concluded in the UK.

In the event that policies are identified where the Member State of Commitment is found to be an EEA

jurisdiction, legal advice was obtained for the 8 EEA jurisdictions with approximately 100 or more

policyholder addresses, as set out in Table 5.1 of the 2021 Supplementary Report.

The Independent Expert has explained at paragraphs 5.11 to 5.12 of the 2021 Supplementary Report

that:

"..the ongoing servicing of the Transferring Policies in each of these EEA states either by the

Transferor (if the Scheme is sanctioned) or by the Transferee (if the Scheme is not sanctioned)

would not be prohibited or require any additional regulatory permissions or licences in that

jurisdiction or, where the local law position is not beyond doubt (as is the case in a small

minority of EEA States), that there are good arguments that that would be the case. If it

transpires that the Member state of the commitment for any of the Transferring Policies is in

fact the Relevant EEA State in which they currently reside, further engagement with the relevant

national supervisory bodies would be undertaken at that time in light of the specific facts of the

case. …depending on the jurisdiction concerned, they will either not require any additional

regulatory permissions or licences in order to continue to pay the relevant annuity, or expect

to benefit from continuity principles applied by the relevant national supervisory body. The

implementation of the Scheme is not therefore expected to adversely affect the policy servicing

position with respect to the holders of the Transferring Policies".

While the PRA considers that the Applicants have taken a reasonable and proportionate approach to

seeking advice on this issue, the PRA considers that the question of whether additional regulatory

permissions or licences would be needed in any relevant jurisdiction is one of local law.

29



Accordingly, the PRA is satisfied that this is not a matter which requires it to object to the Scheme.

FCA view:

The FCA reviewed the policyholder objections regarding the ongoing servicing of EEA policies. The

FCA further notes the PRA’s views set out above and the conclusions of the Independent Expert in the

Scheme Report referenced in this Annex. The FCA’s view is that the Transferor has provided a

satisfactory response to the policyholder concerns.


to the Scheme.

Issue 16: The Independent Expert

Description of the Issue: Policyholders have raised objections around a number of concerns relating to

the Independent Expert including the continuing appointment of the Independent Expert since the 2019

proceedings, that there is only one Independent Expert, concerns around the conclusions of the

Independent Expert including his reliance on the work of others, and concerns around the disclosures

of the Independent Expert relating to the roles of his team, fees paid and conflicts of interests including

whether the Independent Expert acts in a personal capacity or on behalf of a firm.

PRA view:

The PRA (in consultation with the FCA) takes decisions relating to approving the appointment of the

Independent Expert and approving the form of the Scheme Report. The PRA considers that appropriate

disclosures were made in order to inform its decision to approve the appointment of the Independent

Expert in 2018 (as set out in paragraph 4.20 and 4.21 of the 2021 Supplementary Report) and to not

object to the continuation of the appointment of the Independent Expert for the 2021 proceedings. The

PRA also considered that the form of the 2021 Scheme Report addressed in sufficient detail those issues

relevant to the PRA's objectives by reference to the PRA's Statement of Policy. Further details are as

set out in paragraphs 11 to 15 of the Fourth PRA Report.

The PRA has reviewed the conclusions of the Independent Expert and reflected those views in the

Fourth PRA Report and this Report, where relevant to the PRA's statutory objectives. However, the

PRA does not approve the conclusions of the Independent Expert. The conclusions in the Scheme

30

Report and 2021 Supplementary Report and the appropriateness of placing reliance on financial

information or legal advice of the Companies are for the Independent Expert to determine, though the

PRA notes the Independent Expert’s rationale at paragraph 4.19 of the 2021 Supplementary Report. In

relation to the arrangements of the Independent Expert (including the role of the team, fees paid and

potential conflicts of interest), the PRA considered these matters when assessing the appropriateness

of the continued appointment of the Independent Expert and concluded that these matters did not give

the PRA concerns under section 109(2) of the Act.




FCA view:

The FCA reviewed the policyholder objections regarding the Independent Expert. The FCA further

notes the PRA’s views set out above and the conclusions of the Independent Expert in the 2021 Scheme

Report referenced in this Annex. The FCA’s view is that the Transferor has provided a satisfactory

response to the policyholder concerns.


to the Scheme.

31

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF

ENGLAND AND WALES

COMPANIES COURT (ChD)

Case No. CR-

2018-003686

IN THE MATTER OF THE PRUDENTIAL ASSURANCE COMPANY LIMITED

AND IN THE MATTER OF ROTHESAY LIFE PLC

AND IN THE MATTER OF THE FINANCIAL SERVICES AND MARKETS ACT 2000

AND IN THE MATTER OF A TRANSFER OF INSURANCE BUSINESS BETWEEN THE

PRUDENTIAL ASSURANCE COMPANY LIMITED (Transferor) and ROTHESAY LIFE

PLC (Transferee)

_____________________________________________________

FOURTH REPORT OF THE

FINANCIAL CONDUCT AUTHORITY

_______________________________________________________

Documents

2021 The Financial Conduct Authority’s ... - pru.co.uk