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B. United Kingdom ‐‐ The Position in the UK
Vivien Tyrell
Edwards Angel Palmer & Dodge UK LLP
1. Introduction
There are a series of statutes and statutory instruments forming the legislative framework of insurer/reinsurer
insolvency in the UK. These include legislation introduced as a result of EU regulation as well as indigenous
statutes which have grown up over many years. Such legislation has, of course, been supplemented over time
by an extensive body of case law. We have set out below a working compilation of cases which reflect the
significant and interesting ways in which insurer/reinsurer insolvency and restructuring law has developed. The
list of cases is not exhaustive but it is our intention that they will provide a summary of the way in which
significant issues have been dealt with. Case references are provided for access to the full judgments which in
turn may refer to further decisions on the relevant point in question.
As far as the legislation is concerned we give a brief summary of the purpose and scope of each relevant act
and statutory instrument to provide an understanding of the workings of the insurer/reinsurer insolvency and
restructuring regime in the UK.
2. Insolvency
In the case of re/insurer insolvency, insolvency regimes (administration, provisional liquidation and liquidation)
are brought into play under the Insolvency Act 1986 (the '1986 Act') (which applies to all types of corporate
entities) coupled with the further specific legislation described below. The 1986 Act creates powers enabling
the legislature to introduce statutory instruments to deal with specific and detailed matters arising in the
implementation of the Act. Those statutory instruments of relevance to re/insurance insolvency are the
Insolvency Rules 1986 (the '1986 Rules') (applying to all types of entities) which sit alongside the specific
Insurers (Winding Up) Rules 2001, SI 2001/3635 (the '2001 Rules'). In cases where the 2001 Rules do not deal
with a particular point, the 1986 Rules are to be relied upon. However, if there is a conflict between 2001 Rules
and the 1986 Rules the former will prevail.
Further statutory instruments are implemented under the Financial Services & Markets Act 2000 (the 'FSMA'):‐
1. The Financial Services & Markets Act 2000 (Insolvency) (Definition of "Insurer") Order 2001, SI 2001/2634 –
This provides a definition of "insurer" for the purposes of Part XXIV, of the FSMA, which relates to
insolvency.
2. The Financial Services & Markets Act 2000 (Administration Orders relating to Insurers) Order 2002, SI
2002/1242 – This has the effect of allowing administration orders to be made in the case of insurance
companies (without it insurance companies were treated as a special case). It however precludes the
administration of an insurance company from being commenced by appointment, either by the holder of a
charge or the board of directors; in other words administration in the case of a re/insurance company must
be by court order. It also clarifies the rules of set‐off and states that those rules do not apply to sums due
from an insurer to another party where an application for an administration order has been made in
relation to the insurer at the time those sums become due.
The Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004/353 (the 2004 Regulations) are an
example of a statutory instrument introduced not under UK statute but as a result of EU legislation. The 2004
Regulations were introduced following the European Council Directive 2001/17/EC on the reorganisation and
winding up of insurance undertakings. (Virtually identical regulations were introduced in 2003 which were
subject to some amendment and reintroduced in 2004). The 2004 Regulations specify the circumstances and
location in which an "EEA insurer" (as defined in the European Third Directive on Non‐Life Insurance
(92/49/EEC)) can be wound up in the UK. Mirror image legislation has been passed in all the other member
states following the same Directive. In addition to establishing the priority distribution of assets in a winding up
of an insurer operating in more than one EEA State (see below), there are provisions aimed at the abolition of
forum shopping and duplication of costs and effort by insolvency practitioners appointed as office holders
over an estate. For example, there are provisions allowing office holders appointed in one EEA State to use the