Prior to conversion of its short-term licence to a non-life licence under the Insurance Act, 2017, the insurer underwrote accident and health policies with what are now both life and non-life risk components. Under the Insurance Act non-life insurers are only permitted to conduct accident and health policies insuring costs or loss of income (not “policy benefits”) on the happening of a disability or death event caused by an accident (not illness or death from other causes).
Consequently the Prudential Authority dealt with the issue under Item 6(5) of the Transitional Arrangements because the licence was converted to a non-life licence under which the policies could not be written. The PA chose to “ensure the orderly resolution of that insurance business of the insurer”. The PA pointed out that the accident and health policies could not be legally underwritten under the non-life licence. It directed the insurer to offer each policyholder a replacement policy with a personal accident death policy and discounted individual funeral products. The insurer was not directed to continue to extend or provide each policyholder with health benefits because that would be illegal. The policies were not cancelled. The policies lapsed because the insurer was no longer permitted to conduct that business. Running off the policies was not legally possible. The policies would then endure until the death of the last surviving policyholder some of whom were younger than 40. This would not “resolve the issue”. The PA’s decision was upheld.
[Amanda Niemiec v Constantia Insurance Company Limited: Financial Services Tribunal: Case no. PA1/2021: 27 October 2021]