Hong Kong:
Transfer of Long-Term Business and
the Court's Role
by Martin Lister and Patrick Peng (Hong Kong)
In a recent case, Re AXA (Hong Kong) Life Insurance Co Ltd.1, the Court of First Instance followed the principles that first emerged from the leading authority of Re London Life Association Ltd2 and reiterated the approach that the Court would take when considering a proposed scheme of transfer of long term business from one insurer to another under section 24 of the Insurance Companies Ordinance (Cap. 41) (the ICO).
THE FACTS
This case concerned a petition presented jointly by AXA (Hong Kong) Life Insurance Company Limited (AXA (HK)) and AXA China Region Insurance Company (Bermuda) Limited (AXA China Region) under section 24 of the ICO for sanction of a scheme to transfer the whole of the long term business of AXA (HK) from AXA (HK) to AXA China Region (the Scheme).
AXA (HK) and AXA China Region are both wholly owned subsidiaries of AXA China Region Limited and authorised by the Hong Kong Insurance Authority (the IA) under section 8 of the ICO to carry on certain classes of long-term business in or from Hong Kong. The purpose of the transfer was essentially to improve the capital and administrative efficiency of AXA China Region group's life insurance business in Hong Kong.
Under the Scheme, upon its becoming effective, AXA China Region would become the insurer under the transferred policies in place of AXA (HK). The terms and conditions of, and the rights of policyholders under, such transferred policies would remain entirely unchanged, and the only difference would be that such rights would, in future, be enforceable against AXA China Region in place of AXA (HK). In this regard, the Court noted that in common with other similar schemes which had been considered in earlier cases, the Scheme did not provide for current policy holders of AXA (HK) to be entitled to opt out of the transfer, or to seek a return of premium or other compensation.
The petition was supported by a report prepared by an independent actuary (the Report). The Report examined the terms and impact of the Scheme in detail and concluded that the proposed transfer would have no adverse impact on the terms of the policies, or the reasonable benefit expectations or the financial security of the transferring policy holders of AXA (HK) or the existing policy holders of AXA China Region.
AXA (HK) and AXA China Region received over three thousands enquiries and responses from the policy holders regarding the Scheme and of these, 21 were complaints. Subsequently, three of the policy holders attended the hearing of the Petition to object to the proposed transfer and make submissions in opposition to it. The objections ranged from concern over the jurisdiction of incorporation of AXA China Region, the fairness of the mechanism under sections 24 and 25 of the ICO and the rationale and soundness of the Scheme.
THE JUDGEMENT
The Court held that the various objections raised by the policy holders were not well founded or were not such that would render the Scheme an unfair one, which should not be sanctioned by the Court.
The Court accepted the opinion of the independent actuary as set out in the Report and concluded that the rights, reasonable benefit expectations and financial security of all policy holders, both of AXA (HK) and AXA China Region appeared to be well protected and to remain substantially unchanged after the transfer. The Court also noted that the IA, having been kept fully informed throughout the process by which the Scheme was devised and also throughout the proceedings, had no objections to the Scheme and maintained this position after hearing all of the objections and enquiries raised by the policy holders. The Court considered that the views of the independent actuary and the IA had provided solid support for the approval of the Scheme.
ENDNOTES
1 Re AXA (Hong Kong) Life Insurance Co Ltd [2012] HKCU 2197
2 Re London Life Association Ltd, 21 February 1989, unreported
3 Re Winterthur Life & Anor [2005] 3 HKC 34
The information in this newsletter is for general guidance only and is not intended to be a substitute for specific legal advice. If you would like any further information please contact:
Martin Lister
Partner (Hong Kong)
+852 3150 1988
mlister@edwardswildman.com
Patrick Peng
Associate (Hong Kong)
+852 3150 1936
ppeng@edwardswildman.com
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