IN THE ROYAL COURT OF GUERNSEY ORDINARY DIVISION IN THE MATTER OF SCOTTISH WIDOWS LIMITED (Transferor) and RL360 LIFE INSURANCE COMPANY LIMITED (Transferee) AN APPLICATION PURSUANT TO SECTION 44 OF THE INSURANCE BUSINESS (BAILIWICK OF GUERNSEY) LAW, 2002, AS AMENDED GUERNSEY SCHEME 4927142v3 1 of 9
1. INTERPRETATION 1.1 Definitions In this scheme (Guernsey Scheme), unless inconsistent with the subject or context, the following expressions shall bear the meanings respectively set opposite them: GFSC means the Guernsey Financial Services Commission; Guernsey Effective Date means the time and date at which this Guernsey Scheme becomes effective in accordance with paragraph 4 of this Guernsey Scheme; Guernsey Law means the Insurance Business (Bailiwick of Guernsey) Law, 2002, as amended; Guernsey Order means an order made by the Royal Court pursuant to Section 44 of the Guernsey Law sanctioning this Guernsey Scheme and any order (including any subsequent order which is ancillary thereto) in relation to this Guernsey Scheme made by the Royal Court pursuant to Part III of the Guernsey Law; Guernsey ILD Policies means those ILD Policies listed in Schedule 7 of the IOM Scheme which form part of the Transferor s Long Term Business prior to the Guernsey Effective Date (and for the avoidance of doubt, including any benefit attributable to such policies but recorded under a different or replacement policy number), which the Royal Court has jurisdiction to transfer pursuant to the Guernsey Law; IOM Effective Date means the Effective Date of the IOM Scheme; IOM Scheme means the scheme pursuant to section 21(1) of and Schedule 2 to the Isle of Man Insurance Act 2008 for, inter alia, the transfer of certain long term business of the Transferor to the Transferee, a copy of which is contained in the Schedule to this Guernsey Scheme, with or subject to any modification, addition or condition made or imposed from time to time in accordance with its terms; Royal Court means the Royal Court of Guernsey; Transferring Guernsey Assets means the Transferring Assets to the extent that they relate to any Transferring Guernsey Policy, including without limitation the rights, benefits and powers of the Transferor under any of the Transferring Guernsey Policies; Transferring Guernsey Business means the Transferring Business to the extent that it relates to the Transferring Guernsey Policies and including without limitation the Transferring Guernsey Policies; Transferring Guernsey Liabilities means the Transferring Liabilities to the extent that they relate to any of the Transferring Guernsey Policies; Transferring Guernsey Policies means every Guernsey ILD Policy under which any liability remains unsatisfied or outstanding at the Guernsey Effective Date including all 4927142v3 2 of 9
certificates, supplemental coverages, endorsements, riders and ancillary agreements in connection therewith and all rights, interests, benefits, powers, liabilities and obligations of the Transferor therein; 1.2 Words and expressions not defined above but used as defined terms shall bear the meanings given to them in the IOM Scheme. 1.3 Subject to clause 1.2 above and except where the context requires otherwise, words and expressions used in the Guernsey Law or in any regulations made under it shall have the same meanings in this Guernsey Scheme. 1.4 Headings in this Guernsey Scheme are inserted for convenience only and shall not affect its construction. 1.5 Any reference in this Guernsey Scheme to an enactment, statutory provision or regulations shall be deemed to include a reference to the enactment or statutory provision or those regulations as from time to time amended, consolidated, modified, replaced or re-enacted by any statute or statutory provision. 1.6 Any reference to the singular includes a reference to the plural and vice versa. Any reference to he, she or it includes the others. 1.7 Any reference to a time of day is a reference, unless otherwise expressly specified, to London time. 1.8 Any reference to this Guernsey Scheme shall include the Schedule hereto. 2. INTRODUCTION THE TRANSFEROR 2.1 The Transferor is the holder of a permit issued to the Transferor by the Authority under section 22 of the Insurance Act permitting it to effect and carry out contracts of Long Term Business in or from the Isle of Man. The Transferor is closed to new business in or from the Isle of Man. The closed book of business is open to increments. The business address in the Isle of Man of the Transferor is at Evergreen House, 43 Circular Road, Douglas, IM99 1LT. 2.2 The Transferor is not a licensed insurer in Guernsey but is permitted as a recognised insurer (as defined in Schedule 5 of the Guernsey Law) to conduct long term insurance business under the Guernsey Law. The Transferor is permitted under the FSMA to effect and carry out contracts of long term insurance in the United Kingdom of classes I, II, III, IV, VI and VII. 2.3 The Transferor has carried on long term insurance business from the Isle of Man and in respect of Transferring Guernsey Policies issued to residents of the Bailiwick of Guernsey. 4927142v3 3 of 9
THE TRANSFEREE 2.4 The Transferee is authorised by the Authority under section 8 of the Insurance Act to effect and carry out contracts of Long Term Business of classes 1 and 2 in or from the Isle of Man. The Transferee has been closed to new business in or from the Isle of Man since 2012. The closed book of business is open to increments. The registered office of RL360 Life in the Isle of Man is at RL360 House, Isle of Man Business Park, Cooil Road, Douglas, IM2 2SP. 2.5 The Transferee is not a licensed insurer in Guernsey but is permitted as a recognised insurer (as defined in Schedule 5 of the Guernsey Law) to conduct long term insurance business under the Guernsey Law. THE TRANSFERRING POLICIES 2.6 The ILD Policies comprise a portfolio of 4,298 life assurance policies offering a range of unit-linked, with-profits and death benefits sold by the Transferor to policyholders. 2.7 The Guernsey ILD Policies, which are listed in Schedule 6 of the IOM Scheme, form part of the ILD Policies, and comprise, at the date of this Guernsey Scheme, 11 out of a total of 4,298 ILD Policies. 2.8 All ILD Policies, including all Guernsey ILD Policies, are governed by the law of the Isle of Man. 2.9 The Transferor and the Transferee are parties to a Hong Kong scheme (the HK Scheme as defined under the IOM Scheme) and, in respect of the Guernsey ILD Policies and the Jersey ILD Policies, the Guernsey Scheme and the Jersey Scheme respectively. There is no requirement to carry out an insurance business transfer under Part VII of the FSMA since the transfer will result in the ILD Policies being carried on from an establishment of the Transferee in the Isle of Man (in respect of the Guernsey ILD Policies and Jersey ILD Policies) and Hong Kong, neither of which are an EEA State. 2.10 The ILD Policies, including the Guernsey ILD Policies, have been administered by RL360 Services Limited since 1990, when the first ILD Policies were written, under an administration agreement between Clerical Medical and General Life Assurance Society and RL360 Services Limited (then called CMI Financial Management Services Limited) dated October 1988. The administration agreement was amended by way of a management agreement for the provision of policy administration services dated 29 May 1998 to reflect a transfer of insurance business from Clerical Medical and General Life Assurance Society to the Transferor (then called Clerical Medical Investment Group Limited), which included the ILD Policies in force at the time and the rights under the administration agreement. On 30 November 2015, the 1998 management agreement was terminated and policy administration and certain other related services continued to be provided with effect from 30 November 2015 pursuant to an outsourced services agreement between the Transferor, RL360 Services Limited and other parties in the SWL Group. 4927142v3 4 of 9
THE TRANSFER 2.11 It is proposed that, by Order of the Royal Court pursuant to Section 44 of the Guernsey Law, the Transferring Guernsey Business shall be transferred to the Transferee at the Guernsey Effective Date on substantially the same terms as the terms of the IOM Scheme governing the transfer of the Transferring Business to the Transferee because the Transferring Guernsey Business is part of the Transferring Business as defined in the IOM Scheme. 2.12 None of the assets and liabilities of the Transferor other than those comprising the Transferring Policies, the Transferring Assets, the Transferring Liabilities, the Residual Policies, the Residual Assets and the Residual Liabilities shall be affected by the IOM Scheme (or the Guernsey Scheme). 2.13 The Transferor and the Transferee have agreed to appear by the same Counsel at the hearing of the Application to sanction this Guernsey Scheme and undertake to be bound thereby and to execute all such documents and to do all such acts and things as may be necessary or expedient to be executed or done by it for the purposes of giving effect to this Guernsey Scheme. REASONS FOR THE SCHEME 2.14 The Transferee and RL360 Services Limited were subsidiaries of Lloyds Bank plc before being sold to RL360 Holding Company Limited (then known as Oak Acquisitions Limited). The sale completed on 30 November 2015. The sale included an agreement that the ILD Policies would be transferred from the Transferor to the Transferee by a transfer of insurance business, subject, inter alia, to approval by the Court and (in relation to the HK ILD Policies) the HK Court. RL360 Services Limited currently administers all of the policies of the Transferee and the ILD Policies pursuant to the terms of the outsourced services agreement referred to in paragraph 2.10 above. 2.15 The main reason for the IOM Scheme and the Guernsey Scheme is to implement a sale of a portfolio of Isle of Man law governed business in order to ensure that the Transferee will be the insurer under almost all of the policies written in the Isle of Man by current and former members of the SWL Group. As a result of the IOM Scheme, the HK Scheme, the Guernsey Scheme and the Jersey Scheme, the Transferor will not have any Isle of Man business following the transfer of the ILD Policies, except for a very small volume of unitlinked policies that cannot be transferred due to the change in tax treatment that would result. RL360 Services Limited will continue to administer all of the policies before and after the sale and transfer pursuant to the terms of the outsourced services agreement referred to in paragraph 2.10 above. The Guernsey ILD Policies are (and will after the Guernsey Effective Date) continue to be administered in the Isle of Man. 3. INCORPORATION OF THE IOM SCHEME 3.1 Save as otherwise set out in this Guernsey Scheme, the terms of: 4927142v3 5 of 9
(a) paragraph 7 (Transfer of Policies, Assets and Liabilities), excluding sub-paragraphs 7.8, 7.9, 7.10, 7.11 and 7.17; (b) paragraph 8 (Continuity of Proceedings); (c) paragraph 9 (Mandates); (d) paragraph 10 (Rights and Obligations under the Transferring Policies); (e) paragraph 11 (Declaration of Trust by SWL); (f) paragraph 12 (Indemnity); (g) paragraph 13 (Allocation); (h) paragraph 14 (Unit-Linked Funds); (i) paragraph 15 (With-Profits Funds); (j) paragraph 16 (Resolution of Allocation Issues); and (k) paragraph 17 (Effective Date); of the IOM Scheme shall be deemed to be part of this Guernsey Scheme as if reproduced herein mutatis mutandis, in so far as they relate to the Transferring Guernsey Business. For this purpose, the following definitions of the IOM Scheme shall be read and construed as follows: (i) Court shall be read as the Royal Court; (ii) Effective Date shall read as the Guernsey Effective Date (as defined in this Guernsey Scheme); (iii) Order shall be read as Guernsey Order (as defined in this Guernsey Scheme); (iv) Residual Policies shall only include Guernsey ILD Policies if the IOM Effective Date occurs before the Guernsey Effective Date; (v) Scheme shall be read as Guernsey Scheme; (vi) Transferring Assets shall be read as Transferring Guernsey Assets; (vii) Transferring Business shall be read as Transferring Guernsey Business; (viii) Transferring Liabilities shall be read as Transferring Guernsey Liabilities; and (ix) Transferring Policies shall be read as Transferring Guernsey Policies. 4927142v3 6 of 9
3.2 The Guernsey Scheme is ancillary to the IOM Scheme and is intended to transfer business issued to any person resident in the Bailiwick of Guernsey and assets and liabilities relating to such business that would not otherwise transfer under the IOM Scheme. Nothing in this Guernsey Scheme shall operate so as to prevent or conflict with any transfer provided for by the IOM Scheme. 4. GUERNSEY EFFECTIVE DATE 4.1 This Guernsey Scheme shall become effective, and the Guernsey Effective Date shall occur simultaneously with the last of the following two conditions being met, namely: (a) the Guernsey Order sanctioning this Guernsey Scheme being made; and (b) the IOM Scheme in relation to the Transferring Business of the Transferor becoming effective in accordance with its terms. 4.2 Unless the Guernsey Effective Date has occurred on or before 30 July 2017 or such later date and/or time, if any, as the Royal Court may allow on application of the Transferor and the Transferee, this Guernsey Scheme shall lapse. 5. MODIFICATION OF THIS GUERNSEY SCHEME 5.1 The Transferor and the Transferee may at any time before the Guernsey Effective Date consent for and on behalf of the persons bound by this Guernsey Scheme and all other persons concerned (other than the GFSC) to any modification or addition to this Guernsey Scheme or to any further condition or provision affecting the same which, prior to its sanction of this Guernsey Scheme, the Royal Court may approve or impose. 5.2 Subject to paragraph 5.3, any amendment to this Guernsey Scheme after the Guernsey Effective Date must: (a) be approved by the Royal Court; (b) be notified to the GFSC, who shall have the right to attend and be heard at any hearing of the Royal Court (if applicable) at which such application is considered; and (c) be accompanied by a certificate from an independent expert, to the effect that in his opinion the proposed amendment will not materially adversely affect the reasonable expectations (including taking account of appropriate obligations to treat customers fairly) of the holders of Transferring Guernsey Policies in any material respect. 5.3 Notwithstanding paragraph 5.2, Royal Court approval will not be necessary in relation to any amendment considered by the Transferee to fall into one or more of the following: (a) any amendment to correct manifest errors; 4927142v3 7 of 9
(b) to ensure the provisions of this Guernsey Scheme operate in the intended manner in circumstances where the provision to which the proposed variation applies will be materially affected by a variation to applicable regulatory requirements; (c) required to reflect any change in any applicable regulatory requirement or in the interpretation or application of any applicable regulatory requirement which has or will have any implications for the Transferor or the Transferee in relation to the terms or operation of this Guernsey Scheme; (d) necessary to reflect any changes in the actuarial practices relating to, or techniques for the management of, the Transferring Guernsey Policies; (e) required to protect the rights and reasonable expectations of the policyholders of the Transferring Guernsey Policies; or (f) which are of a minor and/or technical nature, provided that the GFSC has been notified of the same and has indicated that it does not object thereto within a period of three months commencing on the date of the relevant notification. 6. COSTS AND EXPENSES 6.1 The Transferor shall bear the costs incurred by each of the Transferor and Transferee of preparing and implementing the transfer of the Transferring Guernsey Business under this Guernsey Scheme (including the fees and expenses of any joint legal counsel, counsel for the GFSC, expert, independent actuary or auditor appointed in connection with such transfer and any fees, costs and expenses payable to any court or regulatory authority) with the exception of any internal costs of the Transferee and the costs of any independent legal advice obtained by the Transferee (other than from the joint legal counsel, expert or auditor appointed in connection with the transfer). The costs will be allocated to the "Combined Fund", being one of three funds held by the Transferor, and borne by the shareholders of the Transferor. None of those costs will be borne by the policyholders of the Transferor. 7. GOVERNING LAW 7.1 This Guernsey Scheme shall be governed by and construed in accordance with the laws of the Island of Guernsey. Dated: 2017 4927142v3 8 of 9
SCHEDULE IOM Scheme 4927142v3 9 of 9