The City of London Law Society (CLLS) has published its response to HM Treasury’s consultation paper “Amendments to the Insolvency Arrangements for Insurers” which was published on 20 May 2021.
CLLS considers that the case for introducing the proposed new measures has not been made and makes the following general comments:
- CLLS is not aware of any recent examples where an insurer or reinsurer has ended up in a terminal insolvency process due to the lack of adequate tools for dealing with the financial difficulties;
- CLLS is unaware of any of the industry trade bodies calling for the introduction of new tools;
- the consultation does not specify whether the regulators have views on the proposals, given their potential impact on policyholders;
- many of the existing tools used to restructure distressed companies (including the restructuring plan introduced under CIGA 2020) could be used effectively to restructure the liabilities of an insurance company;
- it is not apparent to CLLS why a specific resolution regime is required for an insurance company which, unlike a bank, is unlikely to be subject to a “run” or events which could cause a precipitous collapse.