INSURANCE ACT 1973 (CTH)
Notice of intention to apply to the Federal Court OF AUSTRALIA for confirmation of a scheme under Division 3A of Part III of the Insurance Act 1973 (Cth) to transfer the insurance business of FM INSURANCE COMPANY LIMITED TO FACTORY MUTUAL INSURANCE COMPANY.
Notice is given that FM Insurance Company Limited ARBN 007 502 829 (FMI) proposes to make an application to the Federal Court of Australia (the Court) seeking confirmation of a scheme under Division 3A of Part III of the Insurance Act 1973 (Cth) to transfer its run-off portfolio insurance business (Insurance Business) to Factory Mutual Insurance Company ARBN 163 108 861 (FMIC) (Scheme). FMI and FMIC are both part of the FMIC (US) global parent group of companies and the Scheme is being undertaken as part of an internal reorganisation of the FMIC (US) group.
Should the Scheme be confirmed by the Court, the Insurance Business of FMI will be transferred to FMIC and FMIC will be substituted for FMI under policies underwritten by FMI on or about 20 December 2021.
The hearing of the application has been fixed on 20 December 2021 or on such other date as the Court appoints. The hearing will be held at the Federal Court of Australia, which is located at 184 Phillip Street, Sydney NSW 2000.
Any person holding a policy underwritten by FMI or who in the Court's opinion is otherwise affected by the Scheme (Affected Policyholders), has the right to attend the Court hearing and request to be heard by the Court on the application for confirmation of the Scheme. On request, each affected policyholder may obtain a full copy of the Scheme Documents by contacting FMI on +61 2 8273 1488 or by email at lynette.schultheis@fmglobal.com.
Affected Policyholders are encouraged to take notice of the Scheme and consider whether they wish to attend and be heard at the hearing. In the event an Affected Policyholder wishes to be heard at the hearing, kindly inform our lawyer, Mr Jonathon Ellis of DLA Piper Australia at least three (3) days before the date fixed for hearing. Mr Ellis’ contact details are as follows:
DLA Piper Australia Level 22, 1 Martin Place Sydney, NSW 2000. Telephone No. : (02) 9286 8197 Email: jonathon.ellis@dlapiper.com | |
Affected Policyholders are not required to take any action if they have no objection to the Scheme.
Copies of this Notice, the Scheme, a summary of the Scheme approved by the Australian Prudential Regulation Authority (Scheme Summary) and the Actuarial Report prepared by Daniel Smith of Taylor Fry dated 9 November 2021 upon which the Scheme is based (collectively the Scheme Documents) will be available on www.fmglobal.com.au from 15 November 2021 until the date of the hearing.
Please contact FMI’s dedicated Scheme hotline by calling +61 2 8273 1488 for any queries by Affected Policyholders in relation to the Scheme or any matter contained in this Notice. An Affected Policyholder may additionally request a copy of the Scheme Documents (free of charge) by contacting the Scheme hotline referred to above.
It is recommended that each Affected Policyholder obtains and reviews the Scheme Documents for further information on the impact of the Scheme on their rights and interests.
Overview
The Insurance Act 1973 (Cth) was enacted by the Commonwealth Parliament to regulate the insurance industry in Australia, ensuring consumer protection and financial stability within the sector. This Act provides the legislative framework for the oversight and administration of insurance businesses, including the mechanisms for restructuring and transferring insurance portfolios. FM Insurance Company Limited has given notice of its intention to apply to the Federal Court of Australia for confirmation of a scheme to transfer its run-off portfolio insurance business to Factory Mutual Insurance Company. This transfer is part of an internal reorganisation of the FMIC (US) group, and should the Court confirm the scheme, Factory Mutual Insurance Company will substitute for FM Insurance Company under policies underwritten by FM Insurance Company on or about 20 December 2021. Policyholders and other affected parties have the right to attend the hearing and request to be heard by the Court on the application for confirmation of the scheme.
Scope and Application
The Insurance Act 1973 (Cth) applies to the proposed transfer of the insurance business of FM Insurance Company Limited (FMI) to Factory Mutual Insurance Company (FMIC) through a scheme of arrangement under Division 3A of Part III of the Act. The Act governs the authorisation and conduct of insurance businesses in Australia and provides for the protection of policyholders and other stakeholders affected by such transfers. The scheme affects policyholders who hold policies underwritten by FMI and potentially any other parties with an interest in the insurance business. The geographic scope of this application is national, as it involves the transfer of an insurance business within Australia under the Commonwealth jurisdiction. The application for confirmation of the scheme by the Federal Court of Australia is expected to address issues related to the compliance with the Insurance Act 1973 (Cth) and the protection of policyholders' rights. The notice and scheme documents are available on FMI's website and through their dedicated hotline, and affected policyholders have the opportunity to be heard at the court hearing if they wish to do so.
Key Provisions
The Insurance Act 1973 (Cth) is being invoked through a Notice of Intention (s 179B) to transfer the insurance business of FM Insurance Company Limited (FMI) to Factory Mutual Insurance Company (FMIC). The transfer is proposed under Division 3A of Part III of the Act (s 179A) to handle FMI’s run-off portfolio insurance business. This transfer is part of an internal reorganisation within the FMIC (US) global parent group of companies. The Federal Court of Australia will be the body to confirm the scheme (s 179C). If confirmed, FMIC will replace FMI under policies underwritten by FMI on or around 20 December 2021 (s 179D).
The Act imposes several obligations on the parties involved in this scheme. FMI must provide a Notice of Intention to the Court and to affected policyholders (s 179B). FMI must also ensure that the Court, affected policyholders, and other interested parties have access to all relevant documents, including the scheme, a summary of the scheme, and an actuarial report (s 179E). Additionally, FMI must establish a dedicated hotline for affected policyholders to contact for any queries related to the scheme (s 179E). The policyholders have the right to attend the Court hearing and request to be heard on the application for confirmation of the scheme (s 179F).
Failure to comply with the requirements of the Insurance Act 1973 (Cth) can lead to various legal consequences. Under section 183 of the Act, a person who contravenes or fails to comply with a requirement of the Act is liable to a penalty. The maximum penalty for individuals is 500 penalty units ($99,500 as of 2023), and for corporations, it is 2,500 penalty units ($497,500 as of 2023). Additionally, under section 184, a person who makes a false or misleading statement in connection with an application under the Act is liable to a penalty. The maximum penalty for individuals is 1,000 penalty units ($199,000 as of 2023), and for corporations, it is 5,000 penalty units ($995,000 as of 2023). These penalties reflect the seriousness with which the Act treats compliance and the protection of policyholders’ interests.