Provident Insurance Plc & Ors v The Financial Services Authority (FSA)

This is a hearing for directions in relation to two linked insurance business transfers pursuant to Part VII of the Financial Services and Markets Act 2000 ("FSMA"). The two transferor companies are Provident Insurance PLC ("Provident") and Gateway Insurance PLC ("Gateway"). The proposed transferee is MMA Insurance PLC ("MMA"). All three companies are members of the Covéa Group, which is headed by Société de Groupe d'Assurance Mutuelle Covéa, a company incorporated in France.

The proposal is to transfer all of the general insurance business of the first and second claimants to the third claimant, MMA; and the purpose of the scheme, shortly stated, is to simplify the legal structure of the Covéa Group's UK operations by concentrating its general insurance business into MMA. This will enable the number of regulated entities in the UK to be reduced and, it is hoped, will result in administrative benefits, savings of costs, and capital benefits under the current regulatory regime and, in due course, the new capital adequacy regime known as Solvency II.

In a little more detail, Provident was incorporated in England on 26^th April 1966 under the name Halifax Insurance Company Limited. Its business consists principally of private motor and commercial vehicle insurance. As at 30^th April 2012 it had 413,000 policies in issue, with net earned premium in the year to 31^st December 2011 of £136 million and net assets of £79 million. The business is short tail in nature and renewable annually. It is derived mainly through brokers and intermediaries, including affinity relationships, often via internet price comparison websites. The affinity relationships are ones where Provident is one of a panel of insurers with which a broker may place business. Many of the policies will be white labelled, which means that the documentation features prominently the name of the partner organisation, e.g. Marks & Spencer, and the name of Provident, although present in small print, is likely to escape the notice of the policyholder, who probably considers himself insured by Marks & Spencer, or by the broker concerned. It is also relevant to note that an affinity broker will not necessarily use Provident alone to underwrite its products: there may be a panel of partners, of which Provident will be only one. The contractual arrangements between brokers and their affinity partners also vary, as one would expect.

Gateway was incorporated on 27^th April 2006 under its present name in Gibraltar. However, all of its business is carried on in the UK under the so-called passporting rights conferred by the Financial Services and Markets Act 2000 (Gibraltar) Order 2001 ( "the Gibraltar Order"). It is a significantly smaller operation than Provident, with business consisting mainly of private motor and home insurance. As at 30^th April 2012 it had 16,000 policies in issue, with net earned premium to the end of December 2011 of £5.9 million, and net assets of £4.1 million. It no longer actively markets new business but does offer renewals to existing policyholders.

MMA is the largest of the three insurance operations involved in the proposals. It was incorporated in 1958 under the name Norman Insurance Company and adopted its present name in 2000. Its business consists of motor, fire and other damage to property, liability and personal accident risks. It obtains its business through traditional brokers and internet price comparison sites. As at 30^th April 2012 it had 2.25 million policies in issue, of which 1.3 million were sold as add-ons for cover written by other insurers. Its net earned premium to 31^st December 2011 was £219 million, and it had net assets of £95 million.

There is one novel feature of the proposals which gives rise to a question of jurisdiction. In the experience of the FSA, and so far as is known to the claimants, this is the first insurance business transfer scheme under Part VII of FSMA to involve the transfer of the insurance business of a firm authorised in Gibraltar by the Gibraltar Financial Services Commissions ("GFSC") to a person authorised in the United Kingdom, i.e. MMA. The importance of the point is that if the transfer does fall within the scope of FSMA, then by virtue of s.104 it cannot have effect unless it has been sanctioned by the court under s.111, but if it does have effect the transfer will take effect accordingly. If, on the other hand, the scheme does not fall within the scope of the FSMA, then the court has no power to sanction it under s.111, and the only means by which the transfer could in theory be effected would be by individual assignments or novations made with each individual policyholder. For obvious practical reasons, that would not be a realistic possibility.

The FSA and the claimants rightly took the view that the court would need to be satisfied on the question of jurisdiction, and the draft order before me contains a recital to that effect. This is the main reason why the directions hearing has been listed before a Judge rather than a Registrar, although there are also questions about notification of policyholders and some extensive waivers are requested from the court, some of which are opposed. In this judgment I will deal first with the question of jurisdiction, and then with the notification issues.

Both the claimants and the FSA agree that the court does have jurisdiction, for reasons which are clearly explained in the FSA's skeleton argument prepared by Mr. Rory Phillips QC leading Mr. Richard Brent. I can say at once that I agree with and accept their analysis, and what follows is closely based upon it. The route to that conclusion, however, is somewhat complex and requires one to pick a path through a legislative thicket. The starting point is sections 104 and 105 of FSMA. Section 104 says:

satisfies one of the conditions set out in subsection (2);

results in the business transferred being carried on from an establishment of the transferee in an EEA State; and

is not an excluded scheme."

It is clear that the requirements of s.105(1)(b) and (c) are satisfied because, first, the UK is an EEA State, and the transferee, MMA, is both authorised by the FSA and carries on its business from an establishment in the UK. Secondly, the scheme is not an excluded scheme, as that term is defined in s.105(3), because Gateway (being the authorised person concerned for the purposes of the subsection) is not a friendly society, a UK authorised person, a person whose policyholders are also its controllers, or a person who solely carries out reinsurance. In particular, Gateway is not a UK authorised person, because it is not incorporated in the UK as required by the definition of UK authorised person in s.105(8). The UK itself is defined by Schedule 1 to the Interpretation Act 1978 as "Great Britain and Northern Ireland".

It therefore remains to see if one of the three conditions set out in s.105(2) is satisfied. The first two conditions are clearly not satisfied because, as I have already explained, Gateway is not a UK authorised person, which is a requirement of the first condition, and Gateway is also not a reinsurer, which is a requirement of the second condition. The critical condition is therefore the third, in s.105(2)(c), which reads as follows:

Taking those requirements in turn, Gateway is clearly not a UK authorised person, as I have already explained. The question whether it is an EEA firm, however, is not so simple to answer. By virtue of s.425(1)(a) of FSMA, an EEA firm, in the relevant context, is defined in para. 5(d) of Part I of Schedule 3 to FSMA as a firm that does not have its relevant office in the UK and is authorised by its "home state regulator". "Home state regulator" is in turn defined by para.9 of Part I of Schedule 3 as:

"EEA State" is in turn defined in Schedule 1 to the Interpretation Act 1978 as any state that is party to the EEA agreement. The key, therefore, to whether Gateway is an EEA firm is whether Gibraltar is an EEA State other than the UK. If it is, GFSC is clearly the competent authority of that state. The answer to this question is that, in the absence of special provision, Gibraltar is not an EEA State; it is a British Overseas Territory, in accordance with the British Overseas Territories Act 2002 and Schedule 6 to the British Nationality Act 1981, for whose external relations the United Kingdom is responsible. It is by virtue of that responsibility for the external relations of Gibraltar that Gibraltar is made subject to the Treaty on the Functioning of the EU (see Article 355(3) of the TFEU); and it is because the TFEU applies to Gibraltar that the EEA agreement also applies to it (see Article 126 of the EEA agreement). The correct position therefore, I am satisfied, is that Gibraltar is not in its own right a party to the EEA agreement, but is rather treated for the purposes of the EU and the EEA as part of the United Kingdom. It follows that, all other things being equal, the answer to this question would be that Gateway is not an EEA firm.

However, it is also necessary to consider the effect of the Gibraltar Order, the general effect of which, at least for certain purposes, is to treat a Gibraltar-based firm as if it were an EEA firm. By virtue of para.2(3) of the Gibraltar Order, Gateway, although Gibraltar is not an EEA State, is deemed to have an entitlement corresponding to an EEA right to establish a branch or carry on services in the UK. For those purposes at least, Gateway is treated as though it were an EEA firm, with the result that it does not need to be authorised by the FSA to carry on business in the UK as would otherwise be the case pursuant to Part III of FSMA. Accordingly, para.2(4) of the Gibraltar Order provides that references in para. 5(d) of Part I of Schedule 3 to FSMA to "the home state regulator" are to be treated as references to the competent authority of Gibraltar, and para.2(5) provides that references to an EEA State are to be treated as references to Gibraltar.

It remains to consider, however, whether the Gibraltar Order also deems Gateway to be an EEA firm for the purposes of Part VII of FSMA, which is the Part dealing with transfers of insurance business, as well as for the purposes of Part III. I am satisfied that the answer to this question is "no", as is shown by a consideration of the powers pursuant to which the Gibraltar Order was made. The Gibraltar Order was made by the Treasury in exercise of powers conferred by ss.409(1) and 428(3) of FSMA. The latter of those subsections gives the Treasury the general power to make incidental, supplemental, consequential and transitional provisions. Section 409, which deals solely with Gibraltar, grants the substantive power, and enables the Treasury, so far as relevant, to:

In relation to Part VII of FSMA, however, there is a separate enabling power in s.117(a) which gives the Treasury the power to:

It follows from this analysis of the necessarily limited scope of the deeming in the Gibraltar Order that, for the purposes of Part VII of FSMA , a firm authorised by the GFSC, such as Gateway, (a) is not an EEA firm for the purposes of s.105(2)(c) of FSMA, but (b) does have "permission to effect or carry out contracts of insurance" as a result of the Gibraltar Order. Accordingly, the third condition in s.105(2) of FSMA is satisfied. As a consequence, the transfer proposed to be made by Gateway is an insurance business transfer scheme within the meaning of s.105 and, as such, it is subject to the compulsory jurisdiction of the court. For these reasons I answer the question of jurisdiction in the sense agreed between the parties, and I am satisfied that the court has jurisdiction to deal with the Gateway transfer.

I now move on to the notification issues. The relevant requirements are contained in the Financial Services and Markets Act 2000 (Control of Business Transfer) (Requirements on Applicants) Regulations 2001 ("the Transfer Regulations"). Regulation 3, para. 1 says:

In addition, by virtue of subparagraph (b), the notice must be "sent to every policyholder of the parties." Paragraph (3) then provides that the notices referred to in para. (2) must be approved by the FSA prior to publication. By virtue of paragraph 4(2), however, the requirements in regulation 3(2)(a)(ii) and (iii) and (b), that is to say all of the requirements save that for publication in the three Gazettes, may be waived by the court in such circumstances and subject to such conditions as the court considers appropriate.

On behalf of the claimants, Mr. Martin Moore QC submits that the discretion of the court under para.4 is very broad. It has to be exercised against the statutory requirements, but in light of the fact that they are capable of waiver, and bearing in mind the principle that notification of affected policyholders is important, the court has to balance a number of factors before deciding to grant a waiver. Those factors may be listed under the following broad and, to some extent, overlapping headings, namely: (i) impossibility or, conversely, possibility of contacting policyholders; (ii) the practicality of doing so; (iii) the utility both to the policyholder and the court of contacting them; (iv) the existence of other information channels through which notice of the transfer is made available; (v) proportionality; and (vi) collateral commercial interests. To these factors may be added: (vii) the object of the transfer; and (viii) the impact of the transfer on policyholders. The first six of the above factors were approved by Floyd J in Direct Line Insurance Plc [2011] EWHC 1482 (Ch) at para. 4, and the last two of them were added by Norris J in Aviva International Insurance Limited [2011] EWHC 1901 (Ch). Norris J also commented that the list of factors is not exhaustive, and every case is likely to be very fact sensitive.

As to the role of the FSA in relation to waivers, Mr. Moore submitted in his skeleton argument that the role of the FSA at this stage is limited to approving the form of the newspaper notice, and the FSA has no remit under the Transfer Regulations to insist that certain groups of policyholders must be circulated. The question whether to waive that requirement is one for the court, not for the FSA. He also submits that, although it is helpful to ascertain the views of the FSA on the proposed communications programme, the FSA has no remit to oppose waivers any more than it does to grant them. Mr. Moore accepts, however, that as a practical matter there is advantage in knowing that the FSA is comfortable with the notification process before resources are committed to implementing it.

It seems to me, however, that this is rather too narrow a way of looking at the role of the FSA at this stage. Mr. Phillips submits that the FSA does have a wider interest in relation to proposals for notification or advertising which derives, in particular, from its consumer protection role, and its role in ensuring that firms comply with their regulatory obligations. These include obligations under the FSA Principles for Businesses such as, in this context, Principle 6: "Customers' Interests", and Principle 7: "Communications with Clients." Thus, in the FSA handbook at para. 18.2.46 one finds the following statement:

The present position is that a number of extensive waivers are sought for the reasons explained in the first witness statement of Mr. Stephen Whittaker, who is a director of MMA, and has been closely involved with the intended transfer proposals. That evidence has recently been supplemented by a second statement of Mr. Whittaker's dated 14^th May. The evidence is helpfully analysed by counsel for the FSA in paras. 36 et seq. of their skeleton argument. They divide the waivers into nine categories and, while they have no objection to seven of them, they do object to two. Before coming to those categories, however, I will first refer to some of the evidence in Mr. Whittaker's first statement. In para. 10.2 he explains that, with the exception of certain policyholders referred to later in his statement, the transferors intend to send notice of the application to all of their respective policyholders, being (a) those with policies still in force at the date of the directions hearing; (b) those, including former policyholders, who have made notifiable claims which have yet to be settled; and (c) those with policies which have lapsed or been cancelled no more than 180 days before the directions hearing date. The significance of the 180 day cut-off period is that statistical analysis shows that approximately 90 per cent of claims are notified within 28 days of a notifiable event, and approximately 99 per cent are notified within 180 days. On this basis, says Mr. Whittaker, the applicants believe that the cut-off date is prudent to ensure maximum circularisation.

He then refers to certain proposed exceptions, one of which is where the transferors believe there are grounds for suspecting that a fraudulent claim is being made, or where the claims in question are dormant which, in this context, means there has been no activity on them for the last 12 months. He explains that the transferors undertake a robust screening process when claims are first made to identify any areas of inconsistency, or any matters which may give rise to suspicion. In addition, a small number of policyholders have their policy avoided at renewal for failure to disclose material facts. The purpose of the screening process is to ensure that genuine claims are settled as soon as possible. Mr. Whittaker says that an indication of the effectiveness of the process is that in 2011 the transferors had only five instances where a complaint was made to the Financial Ombudsman Service relating to a repudiation on the grounds of fraud, and in each case the Ombudsman upheld the decision made by the transferors.

In addition, Mr. Whittaker says it is intended to send notice of the application to all brokers who are known to have placed current business with the transferors, and also to all reinsurers of the transferors. In relation to new policies taken out between the directions hearing and the final hearing date, he says the intention is to send a circular to new policyholders, subject to the dispensation requested in relation to policies brokered by EGL; and in order to deal with policies underwritten in the period between the final hearing date and the effective date under the scheme, it is proposed to send a suitable communication in a form to be agreed with the FSA to new policyholders during that period. In addition, the websites of the applicants will include information in respect of the transfer up to the effective date.

I revert now to the analysis by the FSA's counsel in their skeleton argument, and I begin with the seven categories of waiver to which no objection is made. The first three categories concern all three applicants and are waivers in respect of notifications to policyholders who hold very short term policies, in particular motor policies of up to 28 days. The next two categories concern the two transferor companies, Provident and Gateway, and they effectively cover the ground explained by Mr. Whittaker in his evidence. A waiver is therefore sought so that it will not be necessary to notify policyholders and third party claimants where there are grounds for suspecting fraud or where the claims are dormant. Likewise, where policies have been avoided as a result of non-disclosure, or where the policies have lapsed or been cancelled more than 180 days before the directions hearing. There will also be no notification of reinsurers by means of notices in newspapers because, as I have already said, the proposal is to notify them individually. The next waiver concerns Provident alone and relates to notifications to third party claimants, except where such claimants do not have a solicitor and/or a claims management company acting for them. In those circumstances they will be notified individually provided that electronic records contain an accurate record of their addresses. Where they do have solicitors or claims managers acting for them, the circular will be sent to those solicitors or claims managers.

The final uncontroversial waiver concerns MMA alone, and relates to notification to policyholders who have been sold policies through 10 out of 12 brokers under third party brand names. The proposal for these brokers is that MMA will publish targeted notices in appropriate newspapers by reference to the relevant brand names. A little more explanation of this is provided in para. 22(c) of the FSA's first report dated 10^th May 2012. This paragraph explains that MMA has approximately 925,000 policyholders. I pause to note that this figure omits the holders of add-on policies which I mentioned earlier. The FSA has had detailed discussions with the parties about their desire not to mail those policyholders, and has made it clear that it may be able to agree the proposal not to mail them, provided that targeted notices are included in appropriate newspapers. In relation to the 10 out of 12 brokers who are agreeable to this being done, and who represent around 87 per cent of policyholders, that proposal is acceptable to the FSA. The report explains that those brokers use white labelled policies which are then marketed under the name of various affinity brands. The proposal is to use a single advertisement listing the names of those 10 brokers or brands, plus the name "MMA". I should add that the report now needs to be updated because the latest evidence shows that agreement has also been obtained from Saga and Lloyds Banking Group to go down that route, with the result that the percentage of policy holders who will be approached by such advertisements is now 96 per cent.

I am content to approve all the arrangements which I have described above. It seems to me that they strike a reasonable and proportionate balance between the purpose of the notification requirement on the one hand, and the practicalities of the present situation on the other hand. These proposals also show, to my mind, the benefits of an early dialogue and negotiation between the claimants and the FSA. In my view the sooner that points of this type are flushed out and considered and dealt with, preferably by agreement, the better. I am also satisfied, following some debate at yesterday's hearing, that it would not be appropriate to express the proposed alternative arrangements as formal conditions of the waivers, such that if they are not fully complied with the waivers would necessarily be ineffective. It seems to me that it is impossible to foresee every contingency or mishap which may occur. This is the kind of area where the devil is very much in the detail, and if it turns out that there has been any non-compliance the FSA and the court can and will consider the matter at the approval stage and decide what action, if any, needs to be taken. I would therefore endorse the approach taken in the draft order, which recites that the court is satisfied with the steps intended to be taken to comply with the Transfer Regulations, but simply orders in the operative part that the sending of the approved notice for every policyholder of the applicants be dispensed with. I was informed by Mr. Moore, who has unrivalled experience in this field, that this is the normal, if not invariable, form of order in cases of this nature.

I now turn to the two disputed categories of proposed waiver. Both involve policies sold through one broker, BISL Limited, which is a subsidiary of BGL Group Limited; it is convenient to refer to it as "BGL". The first disputed category consists of policies taken out with Provident through BGL, and the second consists of policies taken out with MMA through BGL. Unlike all the other brokers, BGL has persisted in voicing strong objection both to individual circularisation of its customers with Provident or MMA policies and to any form of targeted advertising as an alternative. The number of customers involved is, in the case of Provident, some 72,000, or approximately 100,000 if one includes policies which have lapsed within the 180 day period which I have already mentioned. In the case of MMA the number of affected policyholders is smaller, but still substantial, amounting to approximately 4 per cent of the total population of policyholders. For a number of reasons the claimants seek to persuade the court that BGL's objections are well founded or, at any rate, are a fact of commercial life which the court cannot ignore, and that they are likely to cause the claimants real prejudice if the court sees fit to override them. I am therefore asked to provide a blanket waiver for all the affected policyholders.

The evidence in support of the application in relation to these two categories is principally contained in paras. 10.10.3 to 10.10.7 of Mr. Whittaker's first statement, as follows:

In his recent second statement, Mr. Whittaker emphasises that BGL is in what he terms "a unique position", in that all of the policies which it arranges are labelled with the brand of one of its affinity partners, of which it has 14 including such major names as Marks & Spencer, Barclays and RAC. By contrast, in the case of all other brokers, the policies are white-labelled with their own brand, or in only a very few cases with the brands of one or two affinity partners. Thus, says Mr. Whittaker, in the case of all policies arranged by BGL, the policyholder is going to associate the name of the affinity partner with the policy, not the name of the underwriter. Furthermore, Provident and MMA are not the sole providers of BGL's policies, but members of a panel of insurers. He says that the proportion of BGL- arranged policies for each brand which is underwritten by Provident is less than 5 per cent. In these circumstances, it is submitted that confusion is likely to be caused if holders of policies arranged through BGL are contacted directly, or if they see a targeted advertisement. For example, such policyholders may gain the mistaken impression that the relevant affinity partner under whose brand the policy was sold is changing, or that their policy is in some way affected when it is, in fact, underwritten with a panel insurer other than Provident or MMA. Problems of this sort, it is said, are likely to place a heavy and unnecessary burden on BGL's call centre and/or the call centres of its affinity partners, while it is most unlikely that the policyholder in question will have any real interest in the transfers before the court, because they took out the insurance in the first place in reliance on the brand of the affinity partner, not the identity of the underwriter.

A further aspect of the matter, according to Mr. Whittaker, is that BGL's arrangements with its affinity partners give them contractual rights over the relevant customer data and the right to veto any use of such data, as well as use of the affinity partners' own brand names and devices in any advertisements. Thus it is that not only BGL itself, but also BGL's affinity partners, strongly resist notification of policyholders or any form of targeted advertising. In support of these arguments Mr. Whittaker exhibits a letter from BGL to Provident dated 30^th April 2012 which expresses most of the concerns to which I have referred, and concludes with the contention that "a waiver is absolutely in the best interests of all parties including those of the customer". Mr. Whittaker also exhibits sample policy documentation of two of BGL's affinity partners, Autotrader Insurance and RAC Insurance, which makes good the point that it is the affinity partners' branding which predominates, and only a careful scrutiny of the small print reveals that the policy is, in fact, underwritten by Provident. I should add that no explanation is afforded of what is meant by the word "underwritten", which for many lay people will be far from self-explanatory.

Relying on this evidence, Mr. Moore urges the court to take a realistic and pragmatic view of the position. He stresses the differences between the business model of BLG and that of the other brokers, and the sheer improbability of any of the relevant policyholders being concerned with the identity of their actual insurer. He argues that the policies are all for short tail business of a simple nature, where the policyholder is not locked into a long term relationship with the insurer, and where the provision of information to the policyholder is therefore comparatively unimportant. He points out that the independent expert, Mr. Stuart Shepley FIA, has prepared a favourable report to the general effect that Provident and Gateway policyholders are likely to see a marginal improvement in their security after the transfer and, for practical purposes, there will be no significant change in the security of MMA policyholders as a consequence of the scheme. Furthermore, the transfer is entirely within the Covéa Group and, for good measure, it is proposed to extend the parent company's guarantee to the transferring policyholders, whereas at present it is enjoyed only by the policyholders of MMA.

Mr. Moore referred me to a recent decision of Morgan J, Re Combined Insurance Co of America [2012] EWHC 632 (Ch), where at paras. 53 to 59 the judge agreed to dispense with notice to former policyholders on pragmatic grounds not dissimilar to those now urged upon me. In particular, Morgan J said this in paras. 53 to 55:

On behalf of the FSA, Mr. Phillips maintained its objection to the waivers. He began with three general points culled from the first instance authorities, while reminding me that the cases are all very fact sensitive, and no guidance has yet been laid down at appellate level. His first point was that the procedural safeguards in the Transfer Regulations are necessary precisely because, as Briggs J said in Re Sompo Japan Insurance Inc [2011] EWHC 260 (Ch) at para.4, the effect of the court's sanction of an insurance transfer scheme is:

In relation to the evidence, Mr. Phillips submitted that it fails to satisfy the test of cogency. He argued that the claimants were giving too much weight to their own perceived commercial difficulties, and too little to the purpose of the notification requirements. He pointed out that there was no first hand evidence that refusal of the waivers would place BGL in breach of its contractual arrangements with its affinity partners, and in response to a suggestion from the Bench he invited me to infer that it was unlikely that the affinity partners in question would maintain any such objection if it was made clear to them that the court took the view that the waivers should not be granted.

Having given these rival submissions my careful consideration I must now state my conclusions. There is undoubtedly force in some of the pragmatic considerations eloquently urged on me by Mr. Moore. I also have well in mind that, although the views of the FSA are entitled to great respect, they are in no sense binding on me. The decision is one for the court, and the court alone. That said, however, it seems to me that an appeal to the virtues of realism needs to be treated with some caution when what is proposed is that some 100,000 present and recent policyholders of Provident, and a smaller, but still substantial, number of policyholders of MMA should receive neither direct notification of the scheme, nor targeted advertisements designed to bring it to their attention. That is a very large constituency of policyholders to disenfranchise, so to speak, even if most of them - through no fault of their own - are probably unaware of the identity of their insurer, and even if the scheme appears to be a straightforward one which, on the available evidence, is likely to attract the approval of the court in due course. The court does have a paternal role to play in scrutinising the scheme with the assistance of the FSA, but that is, in my judgment, an additional safeguard for policyholders, and is no substitute for giving them the opportunity, if they so wish, of participating in the process themselves.

On balance, I agree with and accept the submissions of the FSA. I can understand the concerns expressed on behalf of the claimants and I do not wish to belittle them, but I think that they are outweighed by the need to protect the interests of policyholders as consumers, and I am fortified in that view by the opaque nature of the policy documentation. The suggestion that there is really no point in notifying the policyholders, or directing targeted advertisements to them, because they probably think that their policies are with the affinity partners whose branding is all over their documentation, is one that I find unappealing. In some contexts ignorance may be bliss, but not this one. If the result of notification or targeted advertising is that some puzzled policyholders seek clarification of the true position, that is a problem which it seems to me BLG and their affinity partners have, to a considerable extent, brought upon their own heads.

Nevertheless, as I made clear towards the end of the oral hearing yesterday, I am anxious that the parties should have an opportunity to consider whether some form of targeting advertising could be devised which would minimise the commercial risks touched upon by Mr. Whittaker in his evidence, and which would also minimise any risk of confusion on the part of policyholders, including in particular those whose policies are not, in fact, underwritten by one of the claimant companies. I therefore propose to do no more at this stage than to say that I am not prepared to grant the two waivers to which the FSA objects. Subject to the views of counsel, I will then adjourn the matter for a short period so that the parties can work out the best way forward in the light of my decision, and I hope agree a form of order accordingly. There will, of course, be liberty to restore or mention the matter in the meantime if agreement cannot be reached.