Insurance M&A and restructuring
Mergers, with or without portfolio transfer, acquisitions and changes of control of insurance and reinsurance undertakings or of insurance distributors: due diligence, documentation and approvals, in France and in Luxembourg.
FranceLuxembourg
We act in restructuring transactions involving mergers, with or without , acquisitions or changes of control of insurance and reinsurance undertakings, life and non-life, or of insurance distributors.
A transaction involving an insurer or a (mutuelle) is negotiated with the seller, but it is carried out before the supervisory authority, whether it involves acquiring a holding, obtaining authorisations or completing a portfolio transfer. Its value also depends on whether the contracts, reinsurance treaties and distribution networks are compliant, and on any pending litigation. We review these elements, draft the transaction documents and see the authorisation and transfer procedures through to completion.
What we do
Legal due diligence
- Regulatory: authorisations, previous portfolio transfers, inspection reports issued by the (the French prudential supervision and resolution authority).ACPRAutorité de contrôle prudentiel et de résolution: the French authority, attached to the Banque de France, that authorises and supervises banks and insurers and oversees the protection of their customers.
- Book of business: and (contrat de capitalisation) portfolios, contractual documentation, complaints.Life insuranceA contract under which an insurer undertakes to pay a lump sum or an annuity, at the end of the agreed term or on the death of the insured person, in return for premiums. In France, it is also widely used as a savings and wealth transfer vehicle.Capitalisation contractA savings contract offered by an insurer, similar to life insurance but not linked to the length of a human life: it does not end on death and can be passed on.
- Reinsurance: each in force, with its terms and conditions.Reinsurance treatyAn agreement under which a reinsurer takes on part of an insurer’s risks or commitments, on terms defined for a group of contracts.
- Distribution: networks, distribution and partnership agreements.
- : procedures and documentation.AML/CFTAnti-money laundering and countering the financing of terrorism: the obligations of due diligence, customer knowledge and reporting to Tracfin (the French financial intelligence unit) that apply to insurers and intermediaries. In French: LCB-FT.
- Disputes: pre-litigation and litigation relating to the book of business, intermediaries and service providers.
Negotiation and documentation
- Letters of intent and pre-contractual documentation.
- Acquisition agreements, warranties and indemnities (garanties d’actif et de passif), merger agreements.
- Completion documents and formalities.
- Acquisitions and combinations of brokers and of (CGP) firms.Independent wealth adviser (CGP)An independent professional who advises clients on their wealth and who distributes, among other things, life insurance contracts as an intermediary. In French: conseiller en gestion de patrimoine (CGP).
- The insurance aspects of transactions led by French or foreign law firms, in France and in Luxembourg.
Authorisations and portfolio transfers
- Authorisation procedures before the ACPR and the foreign supervisory authorities concerned; reinsurers’ consent where the treaties require it.
- Setting up insurance companies or branches in France: authorisation or notification files, extension to a new class of insurance.
- Portfolio transfers: review of the contracts and litigation transferred, transfer balance sheet, transfer agreement, follow-up of the procedure until approval.
- Transfers of in-force books of group contracts.
- Effects of the transaction on distribution networks and partnership agreements.
Restructuring
- Reorganisation of life insurance companies after their acquisition.
- Restructuring of mutual insurance groups in light of the requirements of the Code de la mutualité (the French Mutual Insurance Code), including direct insurance and life reinsurance.
- Merging ring-fenced funds (cantons) of life insurance commitments as part of a restructuring.
- Closure of French branches of European insurers and continuation of their commitments under the (FOS): information for policyholders, tax information owed to the French tax authorities.Freedom to provide services (FOS)The regime under which an insurer authorised in one State of the European Economic Area can cover commitments located in another Member State without being established there, on the basis of its home-State authorisation (the European passport). In French: libre prestation de services (LPS).
Run-off and liquidation
- Review of the contracts and claims experience before the sale of a portfolio in .Run-offThe management of a portfolio of contracts that no longer accepts new business, until the contracts come to an end.
- Drafting and negotiating the contracts that entrust the administration of a life insurance portfolio in run-off to a service provider.
- Monitoring run-off portfolios and their litigation.
- Following the liquidation proceedings of life insurance and reinsurance companies supervised by the French authorities.
- Proofs of debt and commutations of reinsurance treaties.
Disputes arising from transactions
- Claims under warranty and indemnity provisions after completion: claims handling, settlement or litigation.
- Pre-litigation and litigation transferred with a portfolio, relating to the contracts issued, to intermediaries or to service providers.
- Disputes over run-off portfolios and challenges to proofs of debt in liquidations.
- Follow-up of an ACPR inspection connected with the transaction: observations, replies to follow-up letters, defence before the Commission des sanctions.
Examples of matters
- 01
Acquisitions of life insurance companies involving portfolio transfers and the reorganisation of the companies acquired.
- 02
Transfers of portfolios of life insurance contracts and of in-force books of group contracts.
- 03
Reorganisation of mutual insurance groups, including direct insurance portfolios and life reinsurance treaties, to reflect changes in the Code de la mutualité.
- 04
Closure of French branches of foreign insurance companies.
Frequently asked questions
Do you need the ACPR’s authorisation to take control of a French insurer?
Yes. Acquiring or increasing a holding in an insurance undertaking, directly or indirectly, above the thresholds set by the regulations requires the ACPR’s prior authorisation; a disposal or reduction is notified to it (Article L. 322-4 of the Code des assurances, the French Insurance Code). The review period must be built into the transaction timetable. In Luxembourg, proposed acquisitions of qualifying holdings are notified to the (the Luxembourg insurance supervisory authority), under a regime of the same European origin.
How does a portfolio transfer of life insurance contracts work?
The transfer requires the supervisory authority’s approval. In France, a notice in the Journal officiel (the French official gazette) informs creditors of the application and gives them two months to submit observations. The ACPR checks in particular that the transfer does not harm the interests of insured persons and creditors; once approved, it is binding on them (Article L. 324-1 of the Code des assurances). The file includes, in particular, the transfer balance sheet and agreement.
Which due diligence findings on a life insurer weigh on the negotiation?
Recurring points include: the compliance of pre-contractual information, which determines the risk of the (renonciation) being exercised late; guaranteed rates and profit sharing (participation aux bénéfices); reinsurance treaties; distribution agreements; AML/CFT procedures. Pending litigation and ACPR inspection reports complete the analysis. Each risk identified is reflected in the price, in the warranties and indemnities or in the terms of the transaction.
What options are there for a life insurance portfolio in run-off?
In practice, there are three routes: managing the portfolio until it runs off, outsourcing that management to a service provider in compliance with the outsourcing rules, or selling the portfolio through a transfer subject to the supervisory authority’s approval. The choice depends on the quality of the data, the claims experience, pending litigation and the reinsurance treaties attached to the portfolio. A review of the contracts comes before the decision and serves as the basis for the negotiation.