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Restructuring could radically reduce your capital requirements

James Eldridge

For some insurers, acquisition activity has created legal entity structures with a number of different underwriting platforms and locally regulated subsidiaries across jurisdictions. This can result in the cost and inefficiency of multiple regulatory rules, relationships and returns and, when the solvency requirements of all the various subsidiaries are added together, an aggregate capital requirement that can be much higher than that of a single consolidated business.

Tools exist to simplify these complex structures, including the insurance business transfer rules available under Part VII of the Financial Services and Markets Act 2000, the EU directive on Cross Border Mergers and the EU single market passporting regulations.

By using these tools, groups can underwrite business through a single entity or, at least, fewer entities and reduce the capital and regulatory burden. While the benefits of restructuring can be significant, undertaking a Part VII transfer or European Cross Border Merger can be time consuming and requires consultation with regulators.

We can support you with planning and implementing a restructuring of your business, including helping with options analysis, business case, modelling and project management. Our actuarial, restructuring, tax and accounting specialists have extensive experience of restructuring insurance businesses and can provide advice and support on the Part VII transfer and European Cross Border Merger processes.

Current market issues such as Brexit and BEPS will also affect a group’s optimal legal entity and operating models, and in the case of Brexit, may require groups to consider creating operations in a new location or exiting the UK entirely.

Insurers should ensure that any restructuring maximises capital efficiency, tax planning and the cost savings available from a simplified group structure, but should also seek to implement a structure that is fit for future purpose to ensure savings are sustainable.

Additionally we give you access to our wider team who can advise you on the wind down of operations and closure following a decision to exit a jurisdiction. Our licensed Insolvency practitioners can provide cost effective and specialist support to eliminate redundant or dormant companies following the transfer of their trade or companies that no longer serve any useful purpose.

Our team is one of the largest insurance sector focused teams in the UK and we are equipped to advise you on the necessary next steps. For more information on how we can support you with legal entity structuring issues, please contact a member of our team.