Seven Thoughts on Part VII Transfers

The first and second waves of Brexit-triggered transfers may now have completed, but further Part VII activity looks set to reach the courts – here are five reasons why, and two things to remember if you are considering embarking on a Part VII.  Come and talk to us if you want guidance through this specialist area.

  1. The most effective route to finality. Unlike adverse development covers and loss portfolio transfers, a Part VII removes any ongoing customer relationship responsibilities and avoids any future reinsurer credit risk.
  2. Brexit isn’t quite over. Believe it or not, savings provisions issued by the UK Government mean that firms can still complete Part VII Transfers to Europe provided they were commenced before Brexit and the transfer takes place by the end of 2022.  EIOPA has agreed with this approach.
  3. Firms want to free up capital to make the most of hard market conditions. Sophisticated capital models are leading firms, through an appropriately designed Part VII, to cut reserving tails, forgo investment float opportunities and deploy underwriting capital as rates harden.
  4. New opportunities in Gibraltar? Brexit legislation has opened up Gibraltar as a Part VII destination.  With its business-friendly and competitive tax environment, will it become a destination of choice for legacy solutions?
  5. Synergy benefits from M&A. Mergers and takeovers are likely to lead to mega-Part VIIs, as large firms seek to consolidate platforms and exit unwanted lines.

If you are thinking about undertaking a Part VII transfer do not underestimate the nature of the beast.  These are serious undertakings, pulling in specialists from across, and outside, the business.  Two top tips to remember are:

  1. Transfer arrangements don’t need to be perfect or even the best possible, they simply need to be fair to policyholders. As an established Independent Expert, I am skilled at assessing each transfer on its merits, weighing up the pros and cons and setting out clearly my views for the Court.
  2. Proper planning is key to ensure this increasingly specialist field is carefully navigated.

Please get in touch if you are considering a transfer and would like to discuss how we can assist you plot your course through the requirements.