On 16 October 2009, Mr Justice Norris released his reasoning for sanctioning the transfer of the long-term insurance business of Commercial Union Life Assurance Company Limited (Commercial Union), CGNU Life Assurance Limited (CGNU) and Norwich Union Life (RBS) Limited (Norwich Union) to Aviva Life & Pensions UK Limited (Aviva) under Part VII of the Financial Services and Markets Act 2000 (FSMA). Aviva wished to rationalise and simplify its corporate structure. This incorporated a reattribution of Commercial Union’s and CGNU’s inherited estates.

Under section 111 of FSMA the Court must be satisfied that in all circumstances of the case it was “appropriate to sanction the scheme”. In order to decide whether it was appropriate to sanction the scheme, Norris J looked at various reports, heard from experts, the FSA and an FSA appointed Policyholder Advocate, as well as hearing objections and opinions from policyholders themselves. The Policyholder Advocate, Ms Spottiswoode, was specifically chosen to negotiate on behalf of the “with profits” policyholders to ensure they received fair compensation for any benefits or rights they may be giving up. This role was the first of its kind in a case such as this, and Norris J described her as a “pioneer”. Ms Spottiswoode explained to Norris J that it was her belief the offer she obtained on the policyholders behalf was considerably in excess of what existing policyholders could anticipate to receive from the inherited estate under the current regulatory regime. Norris J considered this to be one of the main reasons why the majority of “with profits” policyholders voted to accept the cash incentive payment in exchange for giving up their hope of participating in any future distribution from the inherited estates.

To assist the Court in its consideration of an insurance transfer scheme FSMA s.109 provides that the application must be accompanied by the report on an independent expert. The independent expert in this case was Mr Dumbreck, he supported the transfer of business and the FSA considered the scheme to be within the range of reasonable and fair schemes that were available.

In light of the evidence and all the surrounding circumstances, Norris J found that it was appropriate to sanction the scheme as it could not be described as improper or unfair to policyholders, and as such he could not justify withholding the sanction. He was satisfied no coercion had been used to try and persuade policyholders to accept the offer. A committee was set up by Aviva in order to protect and monitor the interests and treatment of the policyholders as regards the inherited estate and the FSA will continue to supervise the “with profit” funds.