Of River Re Limited & Anor, Re

(Please note that due to the poor standard of audio recording it has not been possible to produce a high-quality transcript in this case) MR JUSTICE HILDYARD:

1. This is the joint application of two insurance companies, one called River Re Ltd, which I shall refer to either as "River Re" or "the transferor", and Riverstone Insurance UK Ltd, which I refer to as either "RIUK" or "the transferee", seeking the court's sanction of a transfer pursuant to Part 7 of the Financial Services and Markets Act 2000. I shall try and call that "the Scheme" and the Act, "FSMA" or “the Act”.

2. The scheme is a fairly straightforward one in that the proposal is that River Re should transfer the entirety of its re-insurance and general insurance business, along with its assets and liabilities associated with that business, to RIUK. The transfer is in a sense the culmination of what has already occurred economically in that RIUK, the transferee, has already accepted by re-insurance the various liabilities. The effect of the Scheme will be to align the legal liability and the economic liability for the Transferring Business. Permission of the court or sanction of the court, as it is called, is nevertheless required by express provision of FSMA in that no such transfer can take effect unless sanctioned by the court.

3. As is usual, the joint application for sanction is supported by detailed evidence, including expert evidence relative to one particular feature to which I shall return, which is an issue as to the application or not of sanctions regimes, either to policies or to policy holders. Mr Thornton KC's excellent skeleton argument has walked me through both the content of those witness statements and the relevant provisions in the Act, which provide gateways to the availability of the jurisdiction and prescribe that the court is not to exercise its powers unless those jurisdictional hurdles have been satisfied or overcome.

4. In terms of the companies involved, both River Re and RIUK are private companies incorporated and registered in England and Wales and authorised and regulated by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) to carry out general insurance business in the UK. In terms, therefore, of identifying the nature of the business to be transferred, which is the first question which, as we shall later see, the Court of Appeal has directed that the judge must consider, this is a transfer of general business and not life business. It follows that the various requirements particular to the transfer of life business, including any discretions which are available in many circumstances to life insurers, do not arise for consideration.

5. The transferor, River Re, is owned by AXA Dbio II Holding Sàrl, Lux, a subsidiary of AXA DBIO II, SCSP, Lux, which is a Luxembourg limited partnership. River Re's business is managed by AXA Liabilities Managers SAS, a French company, or at least that was the position prior to the assumption of responsibility in that regard by the transferee. RIUK, the transferee, is a wholly owned subsidiary of Riverstone International Holdings Ltd, a Jersey company. RIUK is in run-off, having written and assumed a diverse portfolio of insurance business, including short and long-term liabilities. The Riverstone Group, of which RIUK is a part, specialises in the acquisition of run-off portfolios and indeed has completed 47 legacy portfolio acquisitions over the last 15 years. It is majority-owned by CBC Capital Partners Strategic Opportunities II LLP.

6. The transferee business, as I have indicated, is comprised of various re-insurance and general insurance contracts, underwritten from 2005 to 2015. The transferee business portfolio comprises primarily of policies from motor insurance, professional identity, property, political and general liability business. As I have indicated, since it has been in run-off since 3 June 2015, it has ceased underwriting any policies since that date. There are approximately 6,042 re-insurance and general policies identified from the available records as being within the transferring business. As at 10 October 2025, which was the last business day of the month prior to the date on which the evidence was first compiled in support of the application for some derogation from any notification requirements, there were approximately 6,042 open policies. As at 31 December 2024 River Re's gross claim reserves for transferring business were approximately £40.4 million, representing less than 60 per cent of River Re's gross technical provisions as of that date.

7. Given that it is in run-off, RIUK is subject to a restriction on its regulatory permission and hence is required to seek non-objection from both the PRA and the FCA before it effects contracts of insurance. To ensure that RIUK can assume liabilities under insurance contracts which are being transferred to it, permission was therefore necessary and was obtained from the regulators, who made the requisite order granting permission on 16 December 2024.

8. As indicated above, the business of River Re includes 167 insurance and re-insurance policies underwritten by River Re, which have been identified pursuant to what is described as an iterative investigatory process as having one or more potential touch points, as they are referred to, to persons or jurisdictions targeted, whether by the EU, the United Kingdom, the UN or the United States of America, and comprising economic, financial and/or trade sanctions.

9. Putting the matter shortly, and based on the specific characteristics as identified of the 167 policies and following advice from legal advisors, River Re has concluded that these policies can be included in the transfer effected by the Scheme without breaking the sanctions regime to any of the countries which I have mentioned. More specifically, it has been concluded that neither EU nor UK financial trade sanctions would prohibit the transfers. River Re have been advised that there is no US nexus to the transfer deed and that the transfer of the 167 policies falls outside the scope of the application of US sanctions. However, there is built into the Scheme, lest there is some problem with sanctions which comes out of the woodwork (if I can describe it as such) in future, a provision for certain of the relevant policies to be treated as residual policies and not transfer over at this time pursuant to the Scheme. Further, I have been provided, lest that should become relevant either now or later, with a witness statement from Mr Douglas R. Maag, senior counsel of Clyde & Co in New York, which contains an interesting description of the US sanctions regime, though in point of fact it is not considered presently to have any specific application in this case.

10. To return to the business to be transferred under the Scheme, of the 6042 open policies, only 383 are active policies, being policies in respect of which River Re holds reserves. The remaining 5,659 policies have no known claims or potential claims, with no claims reserves held against them. Future claims are not expected to arise on these policies, although, as I shall mention, a claim has emerged during the course of the genesis of this Scheme, though I should say immediately, though the sum is relatively large, in excess of one million pounds, the independent expert, whose role I shall describe shortly, is satisfied that it does not cause any material adverse effects such as might imperil the Scheme.

11. Another point which I should mention is that of the active policies, 62.4 per cent are written subject to the laws of England and Wales, and 95 per cent of the reserves relate to those policies that are subject to the laws of England and Wales. Mr De Lavernette, who gave evidence in two witness statements on behalf of River Re, has broken down the remaining policies by reference to the relevant governing law and identified some 15 different jurisdictions. Lest this might cause some difficulty in terms of some provisions which could theoretically entitle the transferee to deny or delay its obligations by virtue of the application of some foreign law, a deed poll has been entered into in a form which is not unusual, which together with the Scheme itself recites and provides for the transferee itself to be liable in respect of commitments, whether or not the foreign law applicable to the relevant policies might make available some technical argument. As I have already mentioned, the Scheme does effect an economic reality in that 100 per cent of the transferring business was reassured or has been reassured by RIUK since I think 31 December 2024.

12. In his skeleton argument, Mr Thornton has set out with great care the relevant jurisdictional requirements prescribed under the Act. These are many and various. I think it suffices to say for the present, unless Mr Thornton cautions me otherwise, that, having carefully assessed them, I am satisfied that there is no jurisdictional impediment or, put the other way, that the jurisdictional gateway has successfully been entered and that I have therefore the power to sanction the Scheme as requested.

13. There are nevertheless two matters which I think I should specifically mention in that regard, so that it can be known that I have considered them. The first relates to the question of notification or advertisement. However perfect the efforts made to identify all the policies, the fact remains that especially where there have been intermediate previous transfers, that an insurance company cannot know for certain that its records are entirely accurate, and whilst the statute offers the gold standard individual notification, that is not usually possible. In the event, a regime for notification advertisement has been devised in iterative discussion in particular with the FCA, which has particular responsibility in this regard. A regime was put before ICC Judge Prentis on 22 October 2025 determining how in accordance with regulation 3(2) the advertisement and notification regime should be addressed. I am entirely satisfied that that regime was appropriate in the circumstances, and I note, as perhaps I should have noted before, that neither the FCA nor the PRA nor for that matter any other person has indicated any objection to that or anything proposed today, and no one appears other than the companies themselves. I am also satisfied in that regard that the directions which were given by ICC Judge Prentis have been complied with as set out in the witness statements in particular of Clair Hubbard, who has also identified the fact that there have been some 17 responses, that all these were either general inquiries, technical inquiries or requests for information and none intimated or suggested any objection to the Scheme.

14. The second matter, which in a sense is the most important matter of all in considering schemes of this sort, is the independent expert's report. The independent expert is a vital and fundamental part of the architecture, whose appointment has to be approved, as it has been, by the regulator, in particular the PRA. In this case, the PRA approved the appointment of Charles Cronje of Lane Clark & Peacock LLP as an independent expert to provide the required report on the terms of the Scheme. The approval was given by letter dated 30 May 2025.

15. The fundamental importance of the independent expert’s report in any scheme of this kind is emphasised by the fact that the regime applicable to the transfers of insurance business of any kind does not provide for any votes of policy holders or members or any such thing, and the court is in a sense reliant on the review of an independent expert as to the consequences likely to occur if the transfer is sanctioned. That is a realistic appraisal of the fact that whilst policy holders may have strong views in certain circumstances, they are unlikely to be able to bring the focused knowledge and experience with regard to the complicated effects of the Scheme and that is better dealt with by an actuary versed in these things with the relevant experience, as I am quite satisfied Mr Cronje has in this case.

16. Mr Cronje's first expert report, which is dated 13 October, sets out in detail the analysis which he conducted and the conclusions which he has drawn. Put briefly, his conclusions are that the implementation of the Scheme on the proposed effective date would not materially adversely affect the security of benefits to policy holders of either the transferor or the transferee, and further, the Scheme will not or should not materially adversely impact on the service standards experienced by the policy holders in either constituency. I note that the PRA approved the form of the independent expert's report by letter dated 15 October 2025.

17. As is required, Mr Cronje has carefully considered the two categories of policy holders that he is concerned with, that is to say, the transferring River Re policy holders and the existing RIUK policy holders. Sometimes, where some part of the business of the transferor left behind, it is also necessary to consider a third constituency, that is to say, those people who are left behind, but no such issue arises here. In relation to the transferring River Re policy holders, Mr Cronje notes that although the solvency capital requirement or SCR in the transferring company does substantially drop from 663 per cent to 209 per cent, he does not consider that to constitute a material deterioration given the low risk of insolvency of an insurer with a 209 per cent SCR, as the transferee will be once the business is assimilated within it. This is exactly the sort of judgment for which the court must look to the independent expert for his assessment, although I am bound to say that it is relatively clear that the coverage is sufficient not to give rise to any scepticism on behalf of the court as to his conclusions in that respect. Mr Cronje then goes on to reach similar conclusions in relation to the existing River Re policy holders, noting that their SCR will increase from 200 per cent to 209 per cent. Mr Cronje has also addressed the position of re-insurers, confirming that they will not be materially adversely affected by the Scheme.

18. Mr Cronje's first report was in effect produced with a view to the hearing before ICC Judge Prentis, and he has supplemented that in his supplemental report dated 23 January 2026. Put shortly, he has confirmed the conclusions he expressed in his first report, but again the form of the supplemental IE report was approved by the PRA on 27 January 2026.

19. I should also mention the involvement, which I have already alluded to, of the regulators, the PRA and the FCA. They have different functions in that the PRA is chiefly concerned with the insolvency issues, whereas the FCA is largely concerned with issues as to policy holder expectations regarding service and with the proper notification of any persons affected. Although they have different functions, FSMA provides that there must be a process of collaboration and discussion between them, and again I am quite satisfied that there has been so in this case. I have read carefully the first PRA report and the first FCA report, which were produced ahead of the directions hearing and considered by ICC Judge Prentis, and have noted the conclusions there drawn, which were in effect that there were no regulatory concerns in respect to the transfer either on behalf of the PRA or on behalf of the FCA, at least at that stage. As also is usual, both regulators have provided further or second reports where they have confirmed that view, with the PRA also expressing its satisfaction with the regime which is proposed with respect to any policy holders who might be affected by any sanctions regime, the long and the short of it being that for the time being and having regard to the provisions of the Scheme for retained policies, they do not regard the Scheme as causing any difficulty in that regard.

20. Accordingly, and with gratitude for a clear set of the independent expert's two reports which have greatly assisted and, as it were, calmed the nerves of the court as regards to any diminution in the SCR, I am quite satisfied that all the jurisdictional requirements have been satisfied and that the independent expert has addressed the relevant factors and come to conclusions which do not in any way suggest that this is not a Scheme which I should sanction.

21. Being satisfied as to my jurisdiction, the question always is whether I should exercise it, and that is a discretionary matter. Cases have long into the past emphasised that the court's function in this regard is not to act as a rubber stamp, but to stand back with the benefit of all it has seen including the expert's reports and the regulators' reports to satisfy itself that the schemes are in the round fair and that it is a proper exercise of this jurisdiction to approve them or give them sanction.

22. In the past the twin cases of Re London Life Association Ltd (1989) and Re AXA Equity & Law Life Assurance Society [2001] 1 All ER (Comm) 1010 were, as it were, the standard quoted texts. As I noted in another case called Mercantile just before Christmas, they seem to me still to offer valuable guidance, but it is of course the fact that they were decisions made in the context of the transfer of life insurance business and therefore contain considerations which are not apt for consideration in this sort of context of general business or re-insurance business. At all events, the Court of Appeal has had a look at this and given fairly comprehensive guidance in Re Prudential Insurance Company Limited [2020] EWCA Civ 1626, in particular paragraphs 75 to

86. It has, in a sense, whilst accepting that the court has discretion in every case, mandated the appropriate approach that the court should take in exercising that jurisdiction. In Mr Thornton's skeleton argument, paragraphs 75 to 86 of the Court of Appeal’s judgment in that case are helpfully set out in full. (I shall not repeat that quotation here, noting only for present purposes that it is set out in paragraph 51 of that skeleton argument over the course of about four pages).

23. Having reminded myself of my task in accordance with those directions of the Court of Appeal, and being satisfied that I have approached that task as they require, I consider that this is an appropriate Scheme to sanction. Put shortly, and as stated in paragraph 52 of Mr Thornton's skeleton argument, first, the proposed Scheme gives effect to reasoned commercial decisions for the boards of directors of the transferors and the transferee respectively. I note in that regard that of course the commercial decision is for the directors of the respective companies in the exercise in the ordinary way of their duties. Second, the views expressed by Mr Cronje in the independent expert's report and in the supplemental IE report that the Scheme does not give rise to any materially adverse effect for any of the affected policy holders, is an entirely understandable conclusion, to which in any event I would give great credence and in this case have no reason to doubt. Thirdly, I have noted the lack of any anticipated or actual opposition on the part of either regulator. Lastly I am satisfied that the Scheme was fully and appropriately explained in the documents distributed to policy holders, and I note in that regard also the absence of any substantial objection from any such constituency.

24. To return quickly to the issue of sanctions, As Mr Thornton explained, if and when it is thought appropriate through discussion with the regulators for the transferor to be dissolved without winding up, thereby crystallising the position, further attention will have to be given as to, if there are any residual policies, what should be done about them. I have briefly discussed with Mr Thornton the possibility that consideration will have to be given in that context to some further process, notification or advertisement as the final clarion call to anyone who might have a claim to come forward. But as he also cautioned me correctly, that will be a matter for further discussion with the regulators, who have overall responsibility for that sort of thing.

25. In conclusion, being satisfied that the court has jurisdiction to sanction the Scheme and that in its discretion it should do so, I will sanction the Scheme and I will hear Mr Thornton very briefly on the draft order which he has proposed, subject to one tiny amendment which he explained but which otherwise seemed to me to be in the usual and conventional form. Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof. Lower Ground, 46 Chancery Lane, London WC2A 1JE Email: [email protected]