Proposal to transfer the General Insurance Business of the Italian branches of: Royal & Sun Alliance Insurance plc. and. Sun Insurance Office Limited

Transcription

1 Proposal to transfer the General Insurance Business of the Italian branches of: Royal & Sun Alliance Insurance plc and Sun Insurance Office Limited to ITAS - ISTITUTO TRENTINO-ALTO ADIGE PER ASSICURAZIONI SOCIETÀ MUTUA DI ASSICURAZIONI SUMMARY OF THE SCHEME (INCLUDING A SUMMARY OF THE INDEPENDENT EXPERT S REPORT) 1

2 PART ONE OVERVIEW 1 Introduction 1.1 In connection with a strategic review of the RSA Insurance Group plc global businesses, it is proposed that all general insurance and/or internal reinsurance business written or assumed by the Italian branch of Royal & Sun Alliance Insurance plc ( RSAI ) and the Italian branch of Sun Insurance Office Limited ( SIO ) (together the Italian Branches ) including all the policies and claims comprised in the Transferring Businesses, will be transferred to ITAS ISTITUTO TRENTINO-ALTO ADIGE PER ASSICURAZIONI SOCIETÀ MUTUA DI ASSICURAZIONI ( ITAS ). 1.2 The transfer will be achieved through a scheme (the Scheme ) which will be submitted to the High Court for its approval under Part VII of the Financial Services and Markets Act The High Court will consider a report on the Scheme's terms by an Independent Expert, Mr Gary Wells of Milliman LLP (whose appointment was approved by the Prudential Regulation Authority (the PRA ), a statutory regulator of financial services in the UK). A summary of the Independent Expert s report is set out in Part Three of this Summary. 1.3 This Summary is prepared for the purposes of Regulation 3(4) of the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001 (as amended). 2 Brief Details of the Scheme 2.1 The full terms of the transfer are set out in the Scheme document which will be subject to Court approval. A summary of the main elements of the Scheme is contained in Part Two of this Summary. Part Four of this Summary contains a Glossary summarising the meaning of any capitalised terms used. 2.2 The main terms of the proposal are as follows: RSAI and SIO will transfer the Transferring Businesses, including (so far as it is possible) all of their assets and liabilities, to ITAS Policies of RSAI and SIO will, once the proposal takes effect, become policies with ITAS. This means that any policyholders or claimants in respect of these policies (including documents in respect of expired policies) will be policyholders or claimants respectively of ITAS following the transfer. 2.3 It is currently expected that the Scheme will be implemented at a.m. (CET) on 1 January In any event, the Scheme will lapse if it has not been implemented on or before 30 June Further Information A copy of the full Scheme document and Independent Expert s report can be found at or requested by writing at RSA Italy, Piazza Piccapietra Geneva, Italy, clearly marked Italy Transfer. 2

3 PART TWO SUMMARY OF THE SCHEME The following is a summary of the main points of the Scheme. It does not explain every aspect of the Scheme. 1.1 The transfer of the Transferring Businesses to ITAS will happen only if the Court gives its approval. In that case, the transfer will become effective at the Effective Time, which is planned to be a.m. (CET) on 1 January The Effect of the Scheme 1.2 As stated above, the Scheme is intended to transfer all the business conducted by the Italian Branches to ITAS. The effect would be that ITAS would replace the Italian Branches as insurer, reinsurer or contractual counterparty as the case may be, and ITAS would also become entitled to the benefit of certain reinsurance that the Italian Branches hold in respect of themselves. 1.3 This means that from the Effective Time, all the rights and obligations arising from the Italian Branches business, including any rights to bring claims under existing or expired policies, will automatically (by operation of law) transfer to ITAS and will no longer rest with the Italian Branches. In particular, ITAS will be responsible for paying all claims and meeting all other obligations which were previously claims against and obligations of, the Italian Branches in respect of the Transferring Businesses. Exceptions 1.4 Despite the intention explained in paragraph 1.2 above, there may be a small number of exceptions to the effect of the Scheme. These would be Excluded Assets, Excluded Liabilities and Excluded Policies. 1.5 Further, to the extent that any property, assets or liabilities that are intended to transfer under the Scheme, are not transferred, for example as a result of a restriction or impediment to transfer (known as Residual Assets and Residual Liabilities), until the date on which such restriction or impediment no longer applies (the Subsequent Transfer Date), RSAI and SIO will hold on trust such Residual Assets or Residual Liabilities until either: (i) the Parties agree not to make such transfer; or (ii) the Subsequent Transfer Date. Continuity of Proceedings 1.6 From the Effective Time, any existing or pending proceedings (including any action or other legal or administrative procedures or complaints or claims) commenced prior to the Effective Time by or against the Italian Branches in connection with the Transferring Businesses shall be continued by or against ITAS, and any such future proceedings in connection with the Transferring Businesses may be brought by or against ITAS. ITAS shall be entitled to all defences, claims counterclaims and rights of set-off that would have been available to the Italian Branches. The Italian Branches shall have no liability under any such proceedings (whether past, current or future). 1.7 From the Effective Time, any judgement, settlement, order or award under existing or past proceedings obtained by or against the Italian Branches in relation to the Transferring Businesses shall be enforceable by or against ITAS, in place of the Italian Branches. 3

4 Premiums and mandates 1.8 Direct debits, standing orders or other instructions or authorities payable to or from the Italian Branches will after the Effective Time be payable to or from ITAS. Costs and Expenses 1.9 All costs and expenses in the preparation of the Scheme, the Report, and the Court process will be borne as to 50% by the Italian Branches, and 50% by ITAS. No such costs will be borne by policyholders. Modifications or additions 1.10 RSAI, SIO and ITAS may propose modifications or additions to the Scheme at the final Court hearing in relation to the Scheme. Any amendments following the Effective Time would be subject to the PRA and FCA having been notified in advance, an independent expert having certified that in his or her opinion the proposed amendment will not materially adversely affect the security of contractual rights and/or the levels of service of holders of Transferred Policies, and, if applicable, be approved by the Court. Court approval will not be necessary in the event of immaterial amendments or in the event of manifest error, however there will still be a requirement to notify the PRA and FCA of such immaterial amendments or manifest errors in advance. 4

5 PART THREE SUMMARY OF THE REPORT OF THE INDEPENDENT EXPERT Introduction 1. This is a summary of a report dated 24 June 2015 (the "Report ) that I, Gary Wells, have prepared having been nominated by RSAI and ITAS and approved by the PRA as an Independent Expert to report on the proposed transfer of the Italian branch businesses of RSAI and SIO to ITAS under an insurance business transfer scheme (the "Scheme ) pursuant to Part VII of the Financial Services and Markets Act 2000 (the "Act ). It should not be read as a substitute for the Report, as taken in isolation it could be misleading. Please refer to the Report for details of the scope of my work and my conclusions. The Report is available online at or may be obtained by written request to RSA Italy, Piazza Piccapietra Genova, Italy or ITAS Mutua, Piazza delle Donne Lavoratrici Trento. 2. The Report is required under Section 109 of the Act in order that the High Court may properly assess the impact of the proposed Scheme. It describes the Transfer under the Scheme and discusses its possible effects on all affected policyholders, including effects on policyholder security and policy servicing levels. 3. Earlier parts of this document contain a description of the Scheme so I have not included one in this summary, although I confirm that the description provided earlier in the document is consistent with my understanding of the Scheme. My summary of the Report below has focused on the security and service levels provided to policyholders and the likely effect of the Scheme on policyholders of RSAI, SIO and ITAS, as applicable. Reliances and Limitations 4. In carrying out my review and producing the Report I have relied without independent verification upon the accuracy and completeness of the data and information provided to me, in both written and oral form, by RSAI, SIO and ITAS. Where possible, I have reviewed some of the information for reasonableness and consistency with my knowledge of the insurance industry. 5. I have only considered the Scheme to which the Report relates and I have not considered any alternative schemes. 6. The Report has been prepared within the context of the assessment of the terms of the Scheme, and must not be relied upon for any other purpose. The Report is not meant for use by any third party to do or omit to do anything and no third party should place reliance on the Report for that reason. It must be considered in its entirety as individual sections, if considered in isolation, may be misleading. 7. In the event of any conflict of interpretation between this summary and the Report, the interpretation contained in the Report will prevail. 5

6 8. Conclusion In my opinion: the security of benefits of the policyholders of RSAI, SIO and ITAS will not be materially adversely affected by the implementation of the Scheme at the Effective Time, subject to the successful implementation of the MAP (defined in paragraph 9.18 below) by ITAS; and the Scheme will not have a materially adverse impact on service standards experienced by the policyholders of RSAI, SIO and ITAS, provided, in the case of the transferring policyholders of the Italian branch of RSAI, that plans are finalised ahead of the Court hearing to sanction the Scheme to ensure that satisfactory systems will be in place at ITAS to service the multinational business from the Effective Time and thereafter. Further details of the reasons for these conclusions are summarised below. For a full understanding of the conclusions that I have reached, together with the rationale for those conclusions, it is important to read the Report. It is also important that the limitations and assumptions contained therein are borne in mind when interpreting these conclusions. Summary of the Independent Expert s Review of the Scheme 9. Security of Policyholders 9.1. Security is provided by the excess of assets (Available Capital) over general insurance business liabilities. Margins in the basis used to value liabilities also contribute to policyholder security A key issue I have had to consider in the course of my work is whether there will be enough capital in ITAS post-scheme to avoid the policyholders of the Italian branches of RSAI and SIO (whose policies will be transferred to ITAS under the Scheme) being materially adversely impacted. I have also considered whether the Scheme will materially adversely impact the existing policyholders of ITAS, as well as the policyholders of RSAI whose policies will not transfer under the Scheme (it should be noted that there are not expected to be any policyholders remaining in SIO following the implementation of the Scheme) As part of my review, I have considered the impact of the implementation of Solvency II, a new regulatory framework for (re)insurance companies in Europe, which will become effective on 1 January 2016, i.e. coincident with the Effective Time I note that I refer below to the business of the Italian branches of RSAI and SIO that will transfer to ITAS under the Scheme as the Transferring Business. The Policyholders of the Transferring Business 9.5. If the Scheme were not implemented, the policyholders would essentially remain with a large, more than sufficiently capitalised company (I describe what I mean by a sufficiently capitalised, well-capitalised or very well-capitalised company in the Appendix to this summary) I have reviewed the reserving basis used by RSAI and SIO to value liabilities. Based on my review, I have concluded that the reserves of RSAI and SIO are reasonable at present. If the Scheme is implemented the reserve strength enjoyed by the policyholders of the Transferring Business will not be materially adversely impacted (as outlined in paragraph 9.17 below). 6

7 9.7. If the Scheme is implemented, the entire liabilities of the Italian branches of RSAI and SIO (predominantly the reserves of the Transferring Business), and suitable assets of equivalent value, will transfer to ITAS at the Effective Time If the Transferring Business moves to ITAS under the Scheme, the reinsurance arrangements (external to those provided by other companies in the same group as RSAI and SIO) which support that business will also transfer (as part of the transferring assets) I have reviewed the financial status of ITAS on the basis of the liabilities and assets transferring to ITAS at the Effective Time (as outlined in paragraphs 9.7 and 9.8 above), and the capital enhancements ITAS is currently in the process of implementing ahead of the Effective Time (as outlined in paragraph 9.18 below) and concluded that ITAS post- Scheme will be a well-capitalised company I have concluded that the security of the policyholders of the Transferring Business would not be materially adversely affected by the Scheme. The Non-Transferring Policyholders of RSAI and SIO The policyholders of RSAI that will not transfer under the Scheme currently benefit from the financial strength afforded by a large, more than sufficiently capitalised company. If the Scheme is sanctioned, the transfer of the liabilities and related risks of the Transferring Business will result in a reduction in RSAI s regulatory capital requirements (on a Solvency II basis). As the Available Capital of RSAI will be unchanged, the company s Capital Cover Ratio (as defined in the Appendix to this summary) will improve. Therefore, the nontransferring policyholders of RSAI will benefit from an improved solvency position if the Scheme is sanctioned. They will also benefit from no longer having any exposure to the risks associated with the liabilities of the Transferring Business I therefore conclude that the security position of the remaining RSAI policyholders would not be adversely affected by the Scheme There are not anticipated to be any policyholders remaining in SIO following the implementation of the Scheme. In the unlikely event of there being any policies that cannot be transferred to ITAS under the Scheme at the Effective Time, these Excluded Policies will be excluded from the Scheme until they can be transferred. RSAI s net liabilities under these policies will be reinsured by ITAS. If this eventuality were to occur, I understand that RSAI/SIO would discuss the situation with the PRA/FCA before proceeding with the Scheme As there is currently no expectation that there will be any remaining policyholders of SIO following the implementation of the proposed Scheme at the Effective Time, I have not considered the matter further. The Existing Policyholders of ITAS In assessing the likely effect of the transfer on the policyholders of ITAS (including those who become policyholders between the date of this summary and the Effective Time), the main risk to consider is that the liabilities from the Transferring Business (currently in RSAI/SIO as appropriate) deteriorate post-scheme to such an extent that ITAS s solvency is threatened I have reviewed the reserving basis presently used by ITAS to value liabilities. Based on my review, I have concluded that the reserves of ITAS are reasonable at present The reserving basis to be used by ITAS (to establish its Solvency II liabilities from the Effective Time) for the company s current business will be equivalent to that adopted for the Transferring Business post-scheme. I therefore believe that the proposed Scheme will not have a materially adverse impact on the reserve strength enjoyed by the policyholders of ITAS (including the policyholders of the Transferring Business). 7

8 9.18. As stated in paragraph 9.7 above, if the Scheme is implemented, the entire liabilities of the Transferring Business and assets of equivalent value will transfer to ITAS at the Effective Time. In the absence of any management actions, the Scheme will lead to an increase in the company s regulatory capital requirements and a corresponding reduction in the company s Capital Cover Ratio. The senior management of ITAS has therefore put in place a Management Action Plan (the MAP ) to enhance the company s capital position after the implementation of the Scheme. The MAP involves:- (1) raising 60m of subordinated debt, thereby explicitly increasing Available Capital; and (2) de-risking the balance sheet by purchasing additional reinsurance (i.e. replacing/enhancing the reinsurance protecting the Transferring Business previously provided by other companies in the same group as RSAI and SIO and increasing the level of Catastrophe cover) thereby reducing the Required Capital under Solvency II The Board of ITAS has approved the issue of the subordinated debt and has applied to IVASS (the Italian regulator) for the loan to be recognised as eligible tier 2 capital under Solvency II. It is currently expected that the bond, which will be listed on the Irish stock market, will be issued by mid-july I have received a copy of a memorandum of intent from the Director General of ITAS instructing the company s reinsurance department to develop suitable reinsurance programmes to de-risk the balance sheet. ITAS has approached reinsurers to obtain the additional catastrophe cover required and has now received written proposals from them. It expects the contracts providing the additional cover to be signed by the end of July 2015 (such additional reinsurance to be come into effect from 1 January 2016). I will report further on ITAS s progress with implementing the MAP in my Supplementary Report (as referred to in paragraph 12 below) I have reviewed the financial status of both ITAS and the wider ITAS Group as at 31 December 2014 on the basis that both the Scheme and the MAP were implemented. I have concluded that, while there would be a reduction in the Capital Cover Ratio (on a Solvency II basis) as compared to the position of ITAS and the ITAS Group pre-scheme, they would nevertheless continue to be well-capitalised post-scheme I have therefore concluded that, subject to the MAP being successfully implemented, the security of the existing policyholders of ITAS would not be materially adversely affected by the Scheme. 10. Levels of Service There will be no changes to the administration of the non-transferring RSAI business as a result of the Scheme Likewise, the administration of the existing business of ITAS will be essentially unchanged as a result of the Scheme There will be no change to the policy administration arrangements of the transferring Italian branch business of SIO as a result of the Scheme, insomuch that the current staff and the self-standing administration and IT platform of SIO will move to ITAS under the Business Sale and Transfer Agreement ( BSTA ) relating to the sale of the Italian businesses of RSAI and SIO to ITAS. Although ITAS will consider converging the claims systems for the SIO and existing ITAS policies, ITAS has informed me that this would not take place until late 2017 or 2018 and would only take place if and when a robust transition could be guaranteed both for the existing ITAS policyholders and those of the Transferring Business. Therefore, the transferring policyholders of the Italian branch of SIO should experience little (if any) change to policy servicing standards resulting from the Scheme. 8

9 10.4. The policy administration arrangements for the transferring multinational Italian branch business of RSAI may be impacted as a result of the Scheme, insomuch that the selfstanding administration and IT platform will not move to ITAS under the BSTA. The senior management of ITAS and RSAI are aware that, in the absence of a suitable self-standing administration and IT platform, the Scheme could potentially impact the policy servicing levels currently enjoyed by the policyholders of the Italian branch of RSAI. Accordingly, ITAS and RSAI have actioned a plan whereby ITAS applies to become a member of the (RSA) Global Network (and it is expected that ITAS will formally be accepted in the Global Network in July 2015) and a feasibility study has commenced for ITAS to acquire from RSAI a clean version of the administration system (known as ATLAS) that is presently used to administer the multinational business of the Italian branch business of RSAI Furthermore, RSAI and ITAS have entered into a transitional agreement under which ITAS will continue to be able to use the ATLAS system for a period of 6 months after the Effective Time of the Scheme. This will ensure continuity of service during that period and give ITAS additional time to either agree the terms of acquiring ATLAS, or find some suitable replacement. If the situation was not resolved within the 6 month period a further extension would be negotiated, and as a contingency measure ITAS could implement a manual transfer of policies to existing systems or administer the business on a purely manual basis I have discussed with RSAI and ITAS the proposed approach (including timing) to having satisfactory systems in place at ITAS to service the transferring Italian branch business of RSAI (as outlined above) and I am of the view that the policy servicing for the transferring policyholders of the Italian branch of RSAI should not be materially adversely affected as a result of the Scheme. Nonetheless, I will comment further on the whether ITAS is admitted as a member of the (RSA) Global Network and developments in the feasibility study being undertaken by ITAS and RSAI on providing a copy of the ATLAS system to ITAS in my Supplementary Report (as referred to in paragraph 12 below) The Transferring Business is currently administered, in compliance with local conduct regulations overseen by IVASS in Italy. This will not change as a result of the Scheme, as the business is to be transferred to an Italian entity I believe that the proposed Scheme is unlikely to have a materially adverse impact on the standards of policy servicing experienced by the policyholders of the Transferring Business compared to their current position, provided in the case of the transferring policyholders of the Italian branch of RSAI, that plans are finalised ahead of the Court hearing to sanction the Scheme to ensure that satisfactory systems will be in place at ITAS to service the multinational business from the Effective Time and thereafter. 11. Other Considerations Policyholder Complaints As policyholders of Italian branches, the policyholders of the Transferring Business currently have no rights of access to the Financial Ombudsman Scheme ( FOS ) for complaints adjudication, but are currently able to raise complaints with IVASS. This situation will not change as a result of the Scheme The Scheme will have no effect on the ability of eligible non-transferring policyholders of RSAI and SIO to bring complaints to the FOS. Likewise it will have no effect on the ability of existing policyholders of ITAS to make complaints to IVASS. 9

10 The Financial Services Compensation Scheme ( FSCS ) In the event of the insolvency of RSAI and/or SIO, eligible policyholders of the Transferring Business currently have recourse to the FSCS to have their claims paid. If the Scheme is implemented, as policyholders of ITAS they would have no recourse to the FSCS in the event of ITAS s insolvency, and there is no equivalent compensation scheme in Italy to which they could turn. Nonetheless, the impact on eligible policyholders of the Transferring Business is unlikely to be significant for a number of reasons, including: Based on the security afforded to the policyholders of ITAS, including those of the Transferring Business if the Scheme is implemented, as outlined in Section 9 above, a scenario in which ITAS is unable to pay its claims in full presently appears remote. The National Guarantee Fund for Road Accident Victims in Italy provides some of the cover of the FSCS (in that it provides for compensation to victims of road traffic accidents where the vehicle is insured with an insurer that has been placed under compulsory winding up at the time of the accident). The ongoing oversight of IVASS, especially moving into the even more transparent Solvency II regime, is important in ensuring that ITAS is able to cover its obligations I am therefore satisfied that the eligible policyholders of the Transferring Business will not be materially adversely affected by the loss of recourse to the FSCS as a result of the Scheme. Solvency II I have considered the impending implementation of Solvency II, a new regulatory framework for (re)insurance companies in Europe, which will become effective on 1 January 2016, from a policyholder security perspective (see Section 9 above) and more generally, and I am satisfied that it does not affect my conclusions. Reinsurers of RSAI and/or SIO The external (to the group of companies to which RSAI and SIO belong) reinsurance arrangements will transfer by virtue of the Scheme and continue to protect the transferring business of ITAS. The amount of the liabilities of each external reinsurer of RSAI, SIO or ITAS will not change as a result of the Scheme. Further, the volumes of inwards reinsurance are relatively small, and so do not materially impact the rights of set-off. Therefore, I do not consider the existing reinsurers to be materially impacted by the Scheme. Membership Rights As policyholders of a mutual company, the existing policyholders of ITAS have certain rights as members of the company. These will not change or be diluted as a result of the Scheme. Supplementary Report 12. Shortly before the date of the Court hearing at which an order sanctioning the Scheme will be sought, I will prepare a Supplementary Report covering any relevant matters which might have arisen since the date of the Report. It is intended that the Supplementary Report will be published on the websites dedicated to the Scheme at least one week before the date of the final Court hearing. Gary Wells, FIA 14 July

11 Appendix For the purposes of my comparative analysis of the excess assets/capital levels of RSAI, SIO and ITAS pre and post the proposed Scheme, I have considered the extent to which each company holds capital in excess of its regulatory solvency level, in which case the actual capital that the company under consideration holds (the Available Capital ) will be greater than the Required Capital calculated. I refer to the ratio of Available Capital to Required Capital as the Capital Cover Ratio. For the purposes of the terms I use in this Report, a company with sufficient capital (relative to the regulatory capital requirement under consideration) will have a Capital Cover Ratio just greater than 100%. I describe a company as well capitalised if it has a Capital Cover Ratio greater than 150% (or thereabouts), and very well capitalised if it has a Capital Cover Ratio in excess of 200% (or thereabouts). 11

12 PART FOUR GLOSSARY Act Excluded Assets the Financial Services and Markets Act 2000 together with the rules and regulations implemented pursuant thereto (as may be amended, modified, replaced or re-enacted from time to time); means those assets that are not intended to transfer to ITAS, for example certain intellectual property rights, and rights or claims under RSA Insurance Group plc insurance policies. Excluded Liabilities (a) any liability whatsoever of RSAI or SIO which is attributable to or connected with an Excluded Asset; or (b) a Tax Liability; Excluded Policies Policies of RSAI and SIO which would fall within the scope of the Transferring Businesses but for the following, under which any liability remains unsatisfied or outstanding at the Effective Time and which were: (a) (b) written by RSAI or SIO in the course of effecting or carrying out insurance business in Italy or any other EEA State, in respect of which the PRA has not prior to the issue of the Order delivered a certificate in the form required by paragraph 5 of Part I of Schedule 12 to the Act in respect of the relevant EEA State which is the State in which a risk is situated, and, for these purposes, State in which a risk is situated bears the meaning ascribed thereto in paragraph 6, Part I of Schedule 12 to the Act and EEA State bears the meaning ascribed thereto in paragraph 8, Part I of Schedule 3 to the Act; or written by either RSAI or SIO but which are not capable of being transferred pursuant to Part VII of the Act at the Effective Time; Policy and Policyholder Residual Asset Residual Liability Subsequent Transfer Date Tax or Taxation each have the meaning, as appropriate, set out in Section 424(2) of the Act and Regulation 2 of the Financial Services and Markets Act 2000 (Meaning of Policy and Policyholder ) Order 2001; an asset that the Parties intended to transfer under the Scheme, but which for any reason was unable to do so; a liability that the Parties intended to transfer under the Scheme, but which for any reason was unable to do so; the date on which a Residual Asset or Residual Liability is transferred from RSAI or SIO to ITAS; all forms of taxation whether direct or indirect and whether 12

13 levied by reference to income, profits, gains, net wealth, asset values, turnover, added value or other reference and statutory governmental, state, provincial, local governmental, or municipal impositions, duties, contributions, rates and levies (including social security contributions and any other payroll taxes), whenever and wherever imposed (whether imposed by way of a withholding or deduction for or on account of tax or otherwise) and in respect of any person and all penalties, charges, costs and interest relating thereto; Tax Liability Transferring Businesses Transferring Liabilities all liability to Tax in respect of all transactions, income, profits and gains effected, earned, accrued or received on, or in respect of, the Transferring Businesses and the Transferring Assets on or before the Effective Time; the whole of the undertaking and business of the Italian Branches whatsoever and whensoever arising (including all activities carried on in connection with or for the purposes of such business and the Transferring Assets and the Transferring Liabilities) excluding: (c) (d) until the relevant subsequent transfer date, any property, assets or liabilities that the Parties intended to be transferred to ITAS but which for any reason are unable to do so (or agree not to do so) until the relevant date on which the impediment to transfer has been lifted (or agreement to transfer is reached); and the Excluded Policies, Excluded Assets and Excluded Liabilities; all liabilities of RSAI and SIO attributable to the Transferring Businesses as at the Effective Time whatsoever and wheresoever arising, including, for example all liabilities under the Transferring Policies, other than, (c) the Excluded Liabilities; and (d) until the relevant subsequent transfer date, any liabilities that the Parties intended to be transferred to ITAS but which for any reason fail to do so; Transferring Policies every Policy written or assumed by either of the Transferors and forming part of the Transferring Businesses, including: (e) policies written by a Transferor which have lapsed at or before the Effective Time and which are reinstated by the Transferee after the Effective Time; 13

14 (f) (g) all proposals for insurance received by a Transferor in respect of a risk which would be allocated to the relevant Italian Branch (as the case may be) before the Effective Time which have not become Policies in force by the Effective Time but which subsequently become Policies, and policies which have expired but in respect of which claims have been or may be brought, but excluding the Excluded Policies; 14