Cica Life Ltd

• Jurisdiction: Bermuda
• Judge: Hargun CJ
• Judgment Date: 27 July 2023
• Docket Number: 2023: No. 149
• Court: Supreme Court (Bermuda)

In the Matter of Cica Life Limited

And in the Matter of Section 25 of the Insurance Act 1978

[2023] SC (Bda) 60 Civ. 27 July 2023

Before:

The Hon. Chief Justice Hargun

2023: No. 149

In The Supreme Court of Bermuda

COMMERCIAL JURISDICTION

Appearances:

Mr Nicholas Miles of Kennedys Chudleigh Limited for the Company

Mr Jeffrey Elkinson of Conyers Dill & Pearman Limited for the Bermuda Monetary Authority

REASONS FOR RULING

Compliance with the requirement that “sufficient notice of the scheme has been served on each policyholder affected” under section 25(3) of the Insurance Act 1978.

Hargun CJ

Introduction

1 Section 25 of the Insurance Act 1978 (“ the Act”) deals with the approval by the Court of any scheme under which long-term business of any insurer is to be transferred to another insurer. Section 25(3) provides that the Court should not entertain any such petition unless the Court is satisfied “ that sufficient notice of the scheme has been served on each policyholder affected…”

2 At the conclusion of the hearing on 25 May 2024 the Court made the following Ruling: “ For reasons to be given, the Court orders that for the Court to be satisfied that a policyholder has been “served” by mail, there must be some evidence by registered mail or other record of service, confirming that the scheme documents had been delivered to the policyholder or evidence that they have been delivered to his last known address.” The Court now sets out its reasons for that Ruling.

3 In considering whether “ sufficient notice of the scheme has been served on each policyholder affected” it is relevant that section 51 of the Act expressly deals with the issue of service of documents. Section 51 provides that:

“ Notices

51 (1) This section has effect in relation to any notice, direction or other document required or authorised by or under this Act to be given to or served on any person other than the Authority.

(2) Any such document may be given to or served on the person in question—

• (a) by delivering it to him;

• (b) by leaving it at his principal place of business; or

• (c) by sending it to him at that address by facsimile or other similar means which produces a document containing the text of the communication.

(3) Any such document may in the case of a company be given to or served—

• (a) by delivering it to the company's principal place of business or registered office in Bermuda; or

• (b) by sending it by registered post addressed to the company's principal place of business.”

4 By way of background, theTransferor is an exempted company registered as Class E insurer under the Act. The Transferee is a company registered in Puerto Rico as an international stock insurer. It is licensed by the Office of the Insurance Commissioner of Puerto Rico. It holds a Class 5 International Insurance license. The Transferor is closed to new business. All new international life business under the CICA brand is now written by the Transferee. The Scheme of Transfer provides for the transfer of the entire in-force business of the Transferor to the Transferee. The purpose of the Scheme of Transfer is to transfer the business to the jurisdiction which is more convenient to policyholders having regard to its Spanish-speaking environment, US territory status and is a US FATCA jurisdiction.

5 The Bermuda Monetary Authority (“ the BMA”) is content not to object to the Scheme of Transfer on its merits but has objected to the Transferor's proposal for notifying “Non-Email policyholders”. This is a group representing about 50% of the policyholders and approximately 29,500 in number, on the basis that the proposal did not involve use of registered/trackable physical mail for all Non-Email policyholders across the board. The Transferor says registered/trackable mail service across the board is disproportionate and that its proposal (which does use an element of trackable mail but is otherwise predominantly by first class mail) fulfils the requirement of section 25(3). The Transferor's proposal comprises a targeted approach to type of physical mail service for Non-Email policy holders resident outside the USA. The Transferor proposes first-class mail service to those in jurisdictions with a local mail service with a high or reasonably high “scan rate”; and trackable service to those policyholders in 4 of the top 12 jurisdictions, which have a poor scan rate (Chile, Paraguay, Uruguay and Nicaragua).

6 Mr Miles, for the Transferor, urges the Court to adopt the approach taken in the English authorities on notification to policyholders regarding transfers under Part VII of the UK Financial Services and Markets Act 2000. Basing himself on the English authorities Mr Miles submits that section 25(3) of the Act may be satisfied by any communications strategy that (i) has the “ ability to reach the intended target groups or is likely to draw the transfer to the attention of a significant proportion of the relevant policyholders” (relying upon the decision of Floyd J in Direct Line v Churchill [2011] EWHC 1667 (Ch) at [10] and [11]; and (ii) is a “ reasonable and proportionate approach to ensuring that the policyholders who have an objection to the scheme have the opportunity of raising it” ( Direct Line v Churchill at [8]).

7 Mr Miles argues that the Court should adopt the English approach since the test is based on whether the communication strategy can be expected or has the ability to achieve the above ends and not on whether it does as a matter of fact. He also contends...