General issues for insurers

Legislation relevant to insurance insolvency

Insolvency laws generally make special provisions for insurance companies because of the regulated status of the industry and the importance of insurance to the economy. The Financial Services and Markets Act 2023 amends the UK’s insolvency arrangements for insurers in order to clarify certain elements, and to expand the protections available to an insurer and its policyholders undergoing insolvency or write-down procedures (see Practice Note: The Financial Services and Markets Act 2023—essentials).

Insolvency procedures available to insolvent insurance companies

The regulators (the Prudential Regulation Authority and the Financial Conduct Authority) must be involved in insolvency-related proceedings against financial services firms (see Practice Note: Financial services firms and insolvency provisions in FSMA 2000).

The following insolvency procedures can be used by an insurance company:

•
liquidation (see: Members’ voluntary liquidation—overview, Creditors' voluntary liquidation (CVL)—overview and Compulsory liquidation—overview), including the appointment of a provisional liquidator
•
administration (see: Administration—overview)
•
company voluntary arrangement (see: Company Voluntary Arrangement—overview)

Insolvent

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Latest Restructuring & Insolvency News

Restructuring & Insolvency weekly highlights—20 February 2025

This week's edition of Restructuring & Insolvency weekly highlights includes: the High Court’s sanctioning of Thames Water’s restructuring plan, the Supreme Court’s decision in relation to transactions defrauding creditors (El-Husseiny v Invest Bank PSC), an analysis on a judgment that tested the Russia (Sanctions) (EU Exit) Regulations 2019 (Nikolay Fetisov and Ilya Yurov v PJSC National Bank Trust), a closer look at a judgment that offers significant guidance on information-gathering powers in cross-border insolvencies (Re Farfetch Ltd (in liquidation)), plus a round-up of other news and cases for restructuring and insolvency professionals.

Transactions at an undervalue, sham litigation and settlements, Marex tort, abuse of process (Hotel Portfolio II UK Ltd (in liquidation) v Marlborough Developments Ltd)

Restructuring & Insolvency analysis: This judgment concerned two sets of legal proceedings connected to allegations of serious dishonesty, fraudulent activity and abusive litigation tactics by various parties to obstruct the enforcement of a judgment. Dr Smith and Mr Ruhan had been long-term adversaries in prolonged and bitter litigation against each other. However, they formed the ‘unholiest of unholy alliances’ in colluding in a scheme to frustrate Hotel Portfolio II UK Ltd’s (HPII’s) efforts to enforce a judgment obtained against Mr Ruhan for £102.26m. The scheme included companies controlled by Dr Smith fabricating litigation against Mr Ruhan leading to a default judgment for £850m, a fabricated settlement agreement and the transfer of assets to entities controlled by Dr Smith. The court found that the transactions were transactions at undervalue under section 423 of the Insolvency Act 1986 (IA 1986), set aside the fraudulent default judgment, struck out the sham proceedings and issued injunctions to protect HPII’s judgment rights against further tortious interference. Written by Justin Perring, barrister, New Square Chambers.

Insolvency Service reports four-year director ban for cold-calling practices

The Insolvency Service has reported the disqualification of Callum Jones, director of Colourcoat Ltd, for a period of four years following an investigation into the company's nuisance cold-calling practices. The Sussex-based firm made nearly one million unsolicited marketing calls between August 2019 and April 2020, targeting individuals who had registered with the Telephone Preference Service. The Information Commissioner's Office (ICO) had previously fined the company £130,000 for breaching the Privacy and Electronic Communications Regulations 2003. Colourcoat Ltd entered liquidation in June 2023, having paid only £74,000 of the fine.

Supreme Court rules on the applicability of section 423 of the Insolvency Act 1986 (El-Husseiny v Invest Bank PSC)

The Supreme Court has unanimously dismissed the appeal, affirming that the language and purpose of section 423 of the Insolvency Act 1986 (IA 1986) point clearly to the conclusion that a transaction within IA 1986, s 423(1) is not confined to a dealing with an asset owned by a debtor but extends to transactions whereby a debtor enters into an arrangement under which a company owned by them transfers a valuable asset for no consideration or at an undervalue.

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