Zurich Insurance Company Ltd, Re

This case concerned a court application to approve the transfer of a UK insurance portfolio from Zurich Insurance Company Ltd to Catalina Worthing Insurance Limited. The portfolio was not a live stream of new consumer policies. It was a legacy book of employers’ liability business written before 2007, with claims that could still emerge many years later.

The commercial background mattered. Zurich had decided, as part of a strategy to dispose of non-core legacy insurance business, to move this book out. Catalina, a legacy insurance specialist, was the proposed transferee. The court was told that the project had already progressed in economic and operational terms before the legal transfer stage came before the court.

The judgment explains why employers’ liability business needs special attention. A claim can be made without the employer being involved, and sometimes after the employer has ceased to exist. More importantly, the liability can arise from exposure to a harmful substance or event during employment, even if the illness is only diagnosed decades later.

That long delay changes the risk profile. Historic employers’ liability books can remain active for many years because workers may later bring claims for conditions such as mesothelioma, asbestosis, noise-induced hearing loss or vibration-related disease. So even though the policies had expired on or before 31 December 2007, the liabilities had not disappeared.

The court first checked the legal gateway conditions for a UK insurance business transfer. The judge had to be satisfied that the transfer involved UK insurance business, that the transferee would carry on the transferred business from a UK or Gibraltar establishment, and that the scheme was not an excluded scheme. The court also checked that the required notices, reports and certificates had been dealt with.

But the real question was discretionary. The judge said the court had to decide whether sanction should be given, guided heavily by the independent expert’s report and the regulators’ views. The central test was whether the proposed scheme would have any material adverse effect on policyholders, employees or other stakeholders.

One of the more useful commercial points in the judgment is that the legal transfer was only the third phase of a longer restructuring. First came an economic transfer through a loss portfolio transfer reinsurance arrangement beginning on 1 April 2019. Then came an operational transfer of claims handling and administration through a migration and outsourcing arrangement beginning on 1 January 2022. The legal transfer was the final step.

That matters because it shows how major regulated restructures are often staged. A business may first shift economic exposure, then move administration, and only later complete the formal legal transfer once the court process is finished. For regulated sectors, private contracts alone may not be enough to complete the whole change.

The judge treated the independent expert as central to the process. The expert’s role was to assess the likely impact of the transfer on different affected groups, including transferring policyholders, non-transferring policyholders, existing policyholders of the transferee, assumed policyholders and relevant reinsurers. The court said its task was to scrutinise and, where needed, interrogate the expert’s work rather than replace it with the court’s own actuarial judgment.

The expert focused on the main risks created by the transfer. These included the fact that Zurich was much larger than Catalina, the concentration of long-tail liabilities in the transferee, the relationship with reinsurance support, the durability of capital over a long period, and stress scenarios in which the transferee might struggle. The PRA and FCA also reviewed the scheme, and neither objected.

The court sanctioned the scheme. The judge found that the technical and procedural conditions had been met, including the notification regime, the availability of the independent expert material, and the necessary solvency certificate. The judge was also satisfied that policyholders had been given a fair and proper explanation of what was proposed and that there had been no pursued objections at the hearing.

On the core merits, the judge accepted the independent expert’s conclusion that there would be no material adverse impact on the affected policyholder groups. The court recognised that Zurich was much larger than Catalina and that some extreme scenarios could be imagined. But the judge concluded that the expert’s analysis was logical, clear, comprehensive and consistent, and that the transfer was fair and appropriate to approve.

Most SMEs will never run a Part 7 transfer, but some will feel the effects of one. If your business has historic employers’ liability exposure, old insurance records may still matter years later. A transfer like this can change which insurer is legally responsible, who handles claims, and where supporting reinsurance sits, even though the underlying historic cover continues to matter.

The broader lesson is about regulated restructures. In heavily regulated sectors, a commercial deal may need court approval, regulator engagement and specialist evidence before it becomes legally effective. If your business is buying, selling or outsourcing regulated books of business, do not assume that a signed contract alone completes the job.