1. What’s happening and why?
1.1 What are the proposed changes?
Royal & Sun Alliance Insurance plc (“RSAI”) and The Marine Insurance Company Limited (“MIC”), two subsidiaries of RSA Insurance Group plc (“RSA”, the parent company in the “RSA Group”) propose to transfer certain of their UK-based general commercial insurance businesses to Mercantile Indemnity Company Limited (“Mercantile”), a regulated company within the Enstar group of companies headed by Enstar Group Limited (“EGL”, the parent company in the “Enstar Group”). This process, which we refer to in this document as the “Scheme”, is also known as an insurance business transfer or a Part VII transfer. Please see question 5 for further information about the Scheme process.
1.2 When will the Scheme happen?
If approved by the High Court of Justice of England and Wales (the “Court”), the Scheme is scheduled to take effect on the “Effective Date”. It is expected that this will be 1 July 2019.
1.3 Which policies are transferring?
All of the business transferring is UK-based general commercial insurance business. The nature of the business differs between RSAI and MIC, as explained below.
Royal & Sun Alliance Insurance plc
With the exception of certain excluded policies described below, the Scheme will transfer from RSAI to Mercantile all of RSAI’s general commercial insurance policies that include liability cover and that were either: (i) written by or on behalf of RSAI prior to 2006, or (ii) written by or on behalf of another insurer prior to 2006 and transferred to RSAI prior to 7 February 2017.
The excluded policies referred to above that will not transfer under the Scheme comprise:
(A) policies that relate solely to marine or motor liabilities;
(B) policies underwritten by a branch or agency incorporated or domiciled outside the UK;
(C) any policy that was transferred to RSAI from Harworth Insurance Company Limited pursuant to a transfer agreement dated 20 December 2013;
(D) any policy underwritten by or on behalf of RSAI through the insurance pool managed by International Oil Insurers;
(E) any policy underwritten by or on behalf of RSAI through the insurance pool managed by the British Insurance (Atomic Energy) Committee for American Risks;
(F) any policy underwritten by or on behalf of RSAI or Royal & Sun Alliance Reinsurance Limited (as reinsurer) to Arrowood Indemnity Co or any company controlled by Arrowpoint Capital (as cedant);
(G) any domestic mortgage indemnity policy;
(H) any policy underwritten by RSAI in respect of business written by any strategic network partner in its home territory pursuant to a Producing Office Agreement with RSAI; and
(I) a small number of specific policies which are identified by policy number in the formal documentation for the Scheme.
The Scheme will also transfer various business contracts from RSAI to Mercantile, including all or part of certain outwards reinsurance contracts, as explained further in section 4 below.
The RSAI business, comprising policies and business contracts and associated assets and liabilities, that is to be transferred to Mercantile by the Scheme is referred to as the “RSAI Transferred Business”.
The Marine Insurance Company Limited
The Scheme will transfer from MIC to Mercantile the following categories of general commercial insurance policies that were either: (i) written by or on behalf of MIC, or (ii) written by or on behalf of another insurer and transferred to MIC prior to 7 February 2017:
(A) all marine energy policies written prior to 2004;
(B) all other marine policies written prior to 1997; and
(C) all aviation policies written prior to 2009.
The Scheme will also transfer various business contracts from MIC to Mercantile, including all or part of certain outwards reinsurance contracts, as explained further in section 4 below.
The MIC business, comprising policies and business contracts and associated assets and liabilities, that is to be transferred to Mercantile by the Scheme is referred to as the “MIC Transferred Business”. The RSAI Transferred Business and the MIC Transferred Business are referred to as the “Transferred Business” under the Scheme.
1.4 What is a general commercial insurance policy that includes liability cover?
This is a type of insurance policy which includes cover for businesses against losses arising from injury being suffered by persons who are not a party to the insurance policy, such as employees and members of the public. Coverage for losses arising from injury to employees is known as employers’ liability insurance, and coverage for losses arising from injury to members of the public is known as public liability insurance.
1.5 Why is RSA doing this?
The transfer of the Transferred Business by RSAI and MIC to Mercantile is part of the RSA Group’s strategic programme to focus on its core businesses. In February 2017, this programme concluded with RSAI and MIC contracting with subsidiaries of EGL to transfer the Transferred Business.