Insurance Australia Limited, in the application of Insurance Australia Limited

Insurance Australia Limited (IAL) applied to the Federal Court of Australia for confirmation of a scheme under section 17F of the Insurance Act 1973 (Cth) to transfer part of its insurance business to Insurance Manufacturers of Australia (IMA). Both companies are subsidiaries of Insurance Australia Group (IAG). The scheme forms part of a minor variation of a joint venture between IAG and RACV. The court was required to decide whether the procedural requirements under the Act, Prudential Standard GPS 410, and dispensation orders had been substantially complied with, whether there were any notices of objection received, whether the interests of the transferring policyholders were not adversely affected in a material way, whether there were no changes to the terms and conditions of the transferring policies, whether the transfer would not impact the ability to meet policyholder obligations, APRA prudential capital requirements, or internal target capital levels, whether there were no changes to relevant reinsurance agreements, whether IMA would be divorced from the impact of the Greensill litigation, and whether there was no material impact on policyholders from IAG’s acquisitions of RACQ and RAC (WA). The court was also required to determine whether APRA did not object to the scheme.

The court found that the procedural requirements under the Act and the Dispensation Orders had been substantially complied with, and that the scheme had been widely publicised. There was no indication that any policyholder sought to make any objection to the scheme. The actuary's report concluded that the interests of the transferring policyholders of IAL would not be adversely affected in a material way as a consequence of the scheme. The court found that the scheme would have no material adverse impact on either the existing policyholders of IMA or the remaining policyholders of IAL. The court was satisfied that the capital position of IMA would be comfortably above 1.50 at the end of this quarter, and would return to its target rate following the usual payment of dividends. The court also found that APRA did not object to the scheme. The court concluded that it was appropriate to confirm the scheme without modification.

The final orders of the court were that the scheme for the transfer of part of the insurance business of IAL to IMA be confirmed without modification, that the effective date for the purpose of the scheme becoming effective and binding in accordance with these Orders is 12.01 am (AEST) on 31 July 2025, and that IMA pay the costs of the proceedings of the Australian Prudential Regulation Authority as agreed or, if agreement cannot be reached, as assessed.