Great Lakes Insurance SE, in the matter of Division 3A of Part III of the Insurance Act 1973 (Cth) (No 2) [2017] FCA 378 - FCA 2017 case summary — Zoe

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Great Lakes Insurance SE, in the matter of Division 3A of Part III of the Insurance Act 1973 (Cth) (No 2) [2017] FCA 378

[2017] FCA 378

Federal Court of Australia|2017-03-23|Before: Yates J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2017-03-23

Before

Yates J

Catchwords

INSURANCE - application for confirmation of scheme for the transfer and amalgamation of insurance business - scheme confirmed without modification

Source

Original judgment source is linked above.

Catchwords

INSURANCE - application for confirmation of scheme for the transfer and amalgamation of insurance business - scheme confirmed without modification

Judgment (18 paragraphs)

[1]

The applicant's name in the proceeding be changed to Great Lakes Insurance SE, trading as Great Lakes Australia ABN 18 964 680 576.
Pursuant to s 17F of the Insurance Act 1973 (Cth) (the Act), the scheme for the transfer of all the insurance business of Calliden Insurance Limited to the applicant (the Scheme) be confirmed in the form of Annexure "A" attached to this order
The effective date for the purpose of the Scheme is 1 April 2017.
Pursuant to 17F of the Act, all rights and obligations owed to Calliden Insurance Limited pursuant to any reinsurance treaties be transferred to the applicant and any reinsurance treaties in which Calliden Insurance Limited is a party in relation to the transferring insurance business shall be amended by replacing Calliden Insurance Limited with Great Lakes Australia, save that this order shall not apply to those reinsurers of contracts of reinsurance that are subject to deeds of novation that have been executed prior to the effective date.
The applicant pay the costs of the proceedings of the Australian Prudential Regulation Authority as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[2]

[4]

2.1 Definitions In this scheme, unless the context otherwise requires: Accounts means the accounts prepared in accordance with Australian Accounting Standard AASB 1023 General Insurance Contracts. Actuarial Report means the report dated 22 December 2016 prepared by Mr Warrick Gard of Ernst & Young in connection with the scheme. Appointed Actuary has the meaning given in the Insurance Act. APRA means the Australian Prudential Regulation Authority. Asset Value means the value of the Claims Trust Accounts. Assumed Liabilities has the meaning given in clause 4(a). Australian Accounting Standard has the meaning given in Prudential Standard GPS 001: Definitions made under the Insurance Act. Business means the insurance business carried on by CIL in Australia within the meaning of the Insurance Act. Business Assets means the assets used by CIL for the purpose of conducting the Business, including the Claims Trust Account, but excluding the Receivables and the Investment Assets. Claim means in relation to any person, a claim, action, proceeding, judgment, damage, loss, cost, expense or liability incurred by or to, or made or recovered by or against, the person, however arising and whether present, future or contingent whether ascertained or not and whether arising before or after the Effective Date. Claims Trust Accounts means the balances of the CIL claims trust accounts held by Innovation Group (Claims Services) Pty Ltd for the purpose of its management of claims on behalf of CIL. Effective Date means 12.00am Australian Eastern Daylight Time on 1 April 2017, or such other date that the Federal Court of Australia may specify as the commencement date of the scheme should the scheme be confirmed by the court. Insurance Act means the Insurance Act 1973 (Cth). Insurance Contracts means all contracts of insurance and all contracts and treaties of reinsurance issued or entered into by CIL as the insurer or reinsurer in the conduct of its Business prior to the Effective Date. Insurance Liabilities means all claims, losses, liabilities, costs or expenses of any kind under the Insurance Contracts, including those which are prospective or contingent and those where the amount of the liability is not ascertained or ascertainable and includes any insurance liability described in Prudential Standard GPS 320: Actuarial and Related Matters made under the Insurance Act. Insurance Liabilities are to be calculated net of reinsurance and non-reinsurance recoveries, discounted outstanding claims liabilities and premium liabilities and are to include expense provisions and risk margins. Investment Assets means any term deposit accounts held by CIL. Payables means the value of the recognised collateral held as deposits by CIL in Australia against the reinsurance recoverables due from non-APRA authorised reinsurers for the purpose of paragraph 6(a)(ii) of Attachment B to Prudential Standard GPS 114: Capital Adequacy: Asset Risk Charge made under the Insurance Act. Receivables means the debts and all other sums due to CIL in connection with the Business prior to the Effective Date, and including premium receivables and reinsurance and non-reinsurance recoverables on claims paid. Reinsurance Contracts means the contracts and treaties of reinsurance entered into or assumed by CIL as reinsured in respect of its liabilities under the Insurance Contracts. Transfer Agreement means the Transfer Agreement dated 15 February 2017 between CIL and GLA for the sale and transfer of CIL's Business to GLA. Transfer Value means the amount of the Insurance Liabilities: (a) reported in the Accounts of CIL for the year ending 31 December 2016, and adjusted to include any additional period up to the Effective Date, as calculated by the Appointed Actuary of CIL; and (b) adjusted to take into account the value of the Payables and the Receivables as at the Effective Date.

[17]

other matters 8 Following the making of the dispensation orders on 14 December 2016, APRA provided GLA with its approval of: the scheme summary under s 17C(1) of the Act; the form of the notice of intention under paragraph 9 in Prudential Standard GPS 410, Transfer and Amalgamation of Insurance Business for General Insurers (GPS 410); the publication of the notice of intention under paragraph 9(b) of GPS 410 in nominated newspapers circulating in the States and Territories; and the nominated locations for inspection under paragraph 16(b) of GPS 410 of the scheme. 9 APRA also provided a "go-ahead decision" under s 41(1) of the Insurance Acquisitions and Takeovers Act 1991 (Cth). 10 There is evidence which satisfies me that there has been compliance with Orders 2 to 7 of the dispensation orders. This has been detailed in an affidavit made by Philip Craig Daley on 20 March 2017. Mr Daley is a project manager employed by Munich Holdings of Australasia. He has responsibility for the internal project management of the scheme. I will not set out the detail of Mr Daley's evidence in this regard other than to note that of the 99,373 letters addressed to the persons identified in paragraphs (a) and (c) of Order 2, 5,773 letters (5.81% of the total number of letters sent) were returned. Mr Daley has proffered likely explanations for the letters being returned which, it seems to me, are reasonable explanations. With regard to the persons referred to in paragraph (b) of Order 2, 1,957 emails were sent and 41 were returned on the same day as undeliverable. A mail-out version of the covering letter and scheme summary to each of these policyholders was dispatched on 16 February 2017. As at 17 March 2017, none of this mail had been returned. 11 The evidence indicates that various communications have been received from policyholders following the dispatch of the scheme summary under Order 2. It is not necessary for me to summarise these communications. On the evidence, none of the policyholders raised any objection to the scheme itself. Moreover, no policyholder indicated an intention to appear at the confirmation hearing, and none has appeared. 12 I note that, as a consequence of the scheme, there will be no change to the policy terms and conditions of affected policyholders, apart from the substitution of GLA as the insurer. Further, there will be no change to claims handling procedures as a result of the scheme. GLA intends to maintain its management of Calliden's claims management process. 13 All of Calliden's reinsurance contracts are governed by Australian State law. Nevertheless, Calliden agreed with APRA that it would separately enter into deeds of novation with all of the non-APRA authorised foreign reinsurers who are parties to Calliden's reinsurance contracts, where such reinsurer's individual participation was deemed, in Calliden's view, to be material reinsurance. Nine such reinsurers were identified and, by 2 March 2017, GLA had completed the negotiation and execution of novation deeds in respect of its reinsurance arrangements with those reinsurers. 14 APRA appeared at the confirmation hearing and signified that it does not oppose confirmation of the scheme.

Great Lakes Insurance SE, in the matter of Division 3A of Part III of the Insurance Act 1973 (Cth) (No 2) [2017] FCA 378

At a glance

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Catchwords

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Catchwords

Judgment (18 paragraphs)

Legislation Cited (2)

Cases Cited (1)