RE CANADA LIFE ASSURANCE CO

HCMP 1449/2025

[2026] HKCFI 4062

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1449 OF 2025

___________________

___________________

__________________________________

REASONS FOR JUDGMENT

__________________________________

1.  At the hearing of the petition presented on 27 August 2025 by The Canada Life Assurance Company (“CLA”), Canada Life Limited (“CLL”) and MyPace Life Limited (“MPL”) (collectively “Petitioners”) seeking sanction from the court in respect of a scheme (“Scheme”) for the purpose of transferring the long term business carried on by CLA and CLL (through their respective Hong Kong branches) (“Business”) to MPL (“Proposed Transfer”), this Court made an order sanctioning the Scheme and gave directions for implementation of the Scheme under ss.24 and 25 of the Insurance Ordinance (Cap. 41) (“Ordinance”). These are the reasons for my judgment.

2.  This matter raises 2 points which concern an application for sanction of a scheme under s.24 of the Ordinance:

(1) First, the role of the Insurance Authority (“Authority”) in dealing with the application at the convening and sanction hearings.

(2) Second, where an insurance company seeks to transfer its long term business to a transferee whose experience and assets are materially inferior to those of the transferor, what protective regime should be put in place to safeguard the interests of the policyholders, and the extent to which the regime should be explained to the court.

A. BACKGROUND

A1. Relevant parties

3.  CLA:

(1) is a company incorporated in Canada, and is wholly owned by Great-West Lifeco Inc., a company incorporated in Canada whose shares are listed on Toronto Stock Exchange (stock code: GWO);

(2) is a federally regulated insurance company with extra provincial insurance registrations across all jurisdictions in Canada;

(3) has established and carried on business at a branch in Barbados (“CLA BB”), which is registered under the laws of Barbados as an external company, and is regulated by the Barbados Corporate Affairs and Intellectual Property Office in accordance with the Companies Act (Cap. 308). CLA BB is licensed under the Insurance Act (Cap. 310) as a Class 2 insurer and is regulated by the Barbados Financial Services Commission, and is licenced to provide long term reinsurance of policies issued by third parties and related companies;

(4) has been registered as an oversea company[1] and subsequently a registered non-Hong Kong company under Part 16 of the Companies Ordinance (Cap. 622); and

(5) has a branch in Hong Kong, which has been authorised to carry on long term businesses of Class A (life and annuity) in or from Hong Kong under Part 2 of Schedule 1 to the Ordinance in Hong Kong.[2]

4.  CLL:

(1) is a company incorporated in England and Wales, and is an indirect wholly-owned subsidiary of CLA. It is regulated by Financial Conduct Authority and Prudential Regulatory Authority under the Financial Services and Markets Act 2000 in the United Kingdom;

(2) has been registered as an oversea company and subsequently a registered non-Hong Kong company; and

(3) has been authorised to carry on Class A (life and annuity) and Class C (linked long term) of long term business in or from Hong Kong, although it does not carry on any Class A of long term business.[3]

5.  MPL, the transferee under the Scheme:

(1) is a Hong Kong company and its shareholders are Asia Insurance Company, Limited (“Asia Insurance”) (51%) and PACE Solutions Limited (“PACE”) (49%);

(2) is incorporated for the specific purpose of taking over the Business from CLA and CLL and does not have any insurance policy in force[4]; and

(3) has obtained approval-in-principle from the Authority to carry on Class A (life and annuity); Class C (linked long term); Class D (permanent health); Class G (Retirement scheme management category I); Class H (Retirement scheme management category II) and Class I (Retirement scheme management category III) of long term business in or from Hong Kong under the Ordinance on 25 August 2025.[5]

A2. Main features of Scheme

6.  The purpose of the Scheme is to enable CLA and CLL to exit the Hong Kong market and close their operations. This has been their plan for over 20 years when they ceased to take on any new long term insurance policies in or from Hong Kong. After the Proposed Transfer, CLA and CLL will cease to carry on any class of insurance business in or from Hong Kong, and will apply to withdraw their respective authorisations to carry on such business and close their Hong Kong branches.[6]

7.  As fairly pointed out by Ms Natalie So, counsel for the Petitioners at the sanction hearing on 9 December 2025, the Scheme is relatively novel compared to other schemes coming to the court in that:

(1) The transferee is a newly-established insurance company,[7] which has obtained in-principle approval from the Authority to carry on relevant long term business in or from Hong Kong on the basis of the Proposed Transfer of the Business.

(2) After the Proposed Transfer, 100% of the insurance risks under the Transferring Policies will be ceded by MPL back to CLA BB via 2 Coinsurance Agreements.

8.  For the purpose of the Proposed Transfer, on 28 August 2025:

(1) CLA, CLL and MPL entered into a framework agreement whereby CLA and CLL agreed to transfer, and MPL agreed to accept, the Business, conditional upon the parties obtaining the court’s sanction on the Scheme.[8]

(2) CLA BB and MPL entered into 2 Coinsurance Agreements the effect of which is to transfer all the assets (including the right to make investment decisions in respect of such assets), risks and liabilities associated with the Transferring Policies from MPL to CLA BB. They are:

(a) “CLA Participating Coinsurance Agreement” whereby 100% of the insurance risks under participating Transferring Policies shall be ceded by MPL to CLA BB.

(b) “Non-par Coinsurance Agreement” whereby 100% of the insurance risks under the non-participating Transferring Policies shall be ceded by MPL to CLA BB.

9.  The Petitioners say that the purpose of the Coinsurance Agreements is to protect the interests of the Transferring Policyholders and ensure the financial security of MPL, the latter being achieved by requiring the relevant liabilities to be borne by the Canada Life group (through CLA BB) after implementation of the Scheme.[9]

10.  The Petitioners propose to “collapse” the 2-stage transfer process to obviate the need for CLA/CLL to first transfer the Business to MPL, then for MPL to transfer the same Business to CLA BB.[10] In other words, although MPL is the transferee, upon the Scheme becoming effective, both the Business and the risks and liabilities associated with the participating/non-participating Transferring Policies will be transferred from CLA/CLL to CLA BB.

A2. Features of Scheme

11.  The following terms, as defined in the Scheme, apply to each of CLA and CLL:

(1) “Business” is the long term business carried on in or from Hong Kong by each of CLA and CLL via their respective Hong Kong branches which comprises their respective Transferring Policies, Transferring Assets, Transferring Liabilities, Residual Assets and Residual Liabilities.

(2) “Transferring Policies” are (a) all insurance policies constituting the long term business underwritten by its Hong Kong branch in or from Hong Kong which (i) are in force as at the Transfer Date, or (ii) have expired or terminated as at the Transfer Date but there are outstanding claims/payments, or (iii) have lapsed for not more than 4 years as at the Transfer Date; and (b) all proposals and applications for policy renewals and reinstatements received but not processed prior to the Transfer Date.

(3) “Transferring Assets” are (a) the property, assets, cash or investments attributable to the Transferring Policies and held in the CLA Long Term Funds or CLL Long Term Funds to cover the Transferring Liabilities as at the Transfer Date, but excludes the Risk Adjustment for Non-Financial Risk and Cost of Guarantees attributable to the Transferring Policies; (b) all right, discretion, power or benefit under the Transferring Policies, but excludes any Residual Assets.

(4) “Transferring Liabilities” are liabilities attributable to the Transferring Assets as at the Transfer Date, including any current or pending complaints, legal proceedings or other proceedings in relation to the Transferring Policies, but excludes any Excluded Liabilities and Residual Liabilities.

(5) “Transfer Date” is the time and date on which the Scheme becomes effective, namely at 00:01 a.m. (HKT) on the date as the Petitioners may decide, which shall be within 90 days after the Court sanctions the Scheme (§12.1).

(6) “Residual Assets” are those Transferring Assets which, as at the Transfer Date, are not capable of being transferred to MPL or the Petitioners agree in writing that such transfer should be delayed, or should not be done; and any proceeds or return earned or received after the Transfer Date in respect of such property or asset.

(7) “Residual Liabilities” are liabilities attributable to the Residual Assets.

(8) “Coinsurance Assets” are Transferring Assets and Residual Assets, while “Coinsurance Liabilities” are Transferring Liabilities and the Residual Liabilities.

12.  Under the Scheme:

(1) The Transferring Assets, Transferring Liabilities and Transferring Policies shall be transferred to MPL on the Transfer Date, but the Proposed Transfer will not become effective unless the Scheme is sanctioned by the court.[11] The Residual Assets and Residual Liabilities will be held by CLA and CLL on trust for MPL until they are transferred to MPL on subsequent date(s).[12]

(2) On the Transfer Date, the Transferring Assets and Transferring Liabilities will be transferred or re-allocated by CLL or CLA directly to CLA BB.[13]

(3) Any legal proceedings, claims or complaints by or against CLA or CLL in relation to the Transferring Policies, Transferring Assets, Transferring Liabilities, Residual Assets and Residual Liabilities shall be deemed to have been continued or commenced by or against MPL[14].

(4) On and with effect from the Transfer Date, MPL shall establish 3 new funds, being (a) MPL Class A Participating Fund; (b) MPL Class A Non-Participating Fund; and (c) MPL Class C Fund[15].

(5) With effect from the Transfer Date, the Transferring Policies, Transferring Assets and Transferring Liabilities will be allocated to the aforesaid new funds set up by MPL (while Residual Assets and Residual Liabilities will be allocated to such funds on the dates when they are subsequently transferred)[16].

(6) All premiums, loan repayments and other amounts received or receivable by CLA and CLL (or their respective agents) in respect of any of the Transferring Policies on or after the Transfer Date shall be payable to MPL[17].

(7) All costs and fees in relation to the preparation of the Scheme and application for sanction will be paid by the Petitioners from their respective shareholders’ funds[18].

(8) Save for amendments to correct manifest error or which are reasonably necessary to ensure that the Scheme operates in the intended manner where there is any change in the laws/regulations, the terms of the Scheme can only be modified with the approval of this Court, provided that the Authority has been notified of the same and does not object to such amendments[19].

13.  At the first blush, the effect of the Scheme is to transfer the long term business from CLA and CLL to MPL like other similar schemes created for such purpose. In practice, this will not happen. The effect of the Scheme is modified by the Coinsurance Agreements entered into between MPL and CLA BB and the so-called “collapsing” the 2-stage transfer process. The net effect is that neither the Transferring Assets nor the Transferring Liabilities will be transferred to or vested in MPL (transferee). Instead, the transferee will only perform limited administrative functions in respect of the participating/non-participating Transferring Policies and fulfil the regulatory requirements under the Ordinance.

14.  The court is concerned to see that it is appropriate or fair for the Petitioners to implement the Scheme in this way. This requires the court to consider not just the terms of the Scheme but the Proposed Transfer as a whole to see whether the reasonable expectations, rights and interests of the Transferring Policyholders will not be materially affected or prejudiced in circumstances where:

(1) The transferee (MPL) does not have much significant assets of its own to honour any liabilities associated with the Transferring Policies. Nor does it have any experience in insurance business;

(2) The transferee (MPL) will not receive or hold the Transferring Assets as all the Transferring Assets (except Unit Linked Assets, see §§21-23 below) will be transferred to and held by CLA BB and be held subject to the Trust Agreement (discussed in §19 below);

(3) CLA BB is described as “reinsurer” of the Transferring Policies but neither the Scheme nor the Coinsurance Agreements involve any reinsurance of the Transferring Policies; and

(4) CLA BB will perform all important functions ordinarily carried out by a transferee in respect of the Transferring Policies namely, (a) assume and bear the Transferring Liabilities associated with the Transferring Policies; (b) make payments to the Transferring Policyholders; and (c) make investment decisions in the course of managing the Transferring Assets for the purpose of generating returns.

A3. Coinsurance Agreements

15.  Ms So describes the effect of the Coinsurance Agreements in this way:

(1) Through the Coinsurance Agreements, “the insurance liabilities of the Transferring Policies will ultimately continue to be borne (directly or indirectly) by the same Canada Life group as pre-transfer (viz. CLA BB)”.[20]

(2) To facilitate this, all the Transferring Assets (except Unit Linked Assets) will be re-allocated or transferred directly from CLA/CLL to CLA BB – such that they are “directly held”:[21]

(a) By having CLA BB (being the reinsurer who is ultimately liable under the Transferring Policies) holds ownership and investment management powers over the Transferring Assets so that it has control over investment returns. This is said to be critical for provision of discretionary benefits for the participating Transferring Policies.

(b) The Canada Life group already has the systems, models and governance in place for managing long term fixed income assets that back participating liabilities, and it will be more cost-effective to continue the same through CLA BB[22].

16.  Ms So submits that the effect of the Coinsurance Agreements is that the Canada Life group (through CLA BB) is ultimately bearing the brunt of the liabilities of the Transferring Policies after implementation of the Proposed Transfer. As CLA BB will be making the relevant payments to policyholders, it is vested with the assets attributable to the Transferring Policies and can make relevant investments to generate returns as required (save for Unit Linked Assets).

17.  CLA BB is a branch of CLA and thus indistinguishable from CLA. The CLA BB operations are required to hold the local Barbados capital requirements while CLA as a whole is required to hold the Canadian capital requirements (LICAT). CLA itself has demonstrated a robust solvency ratio over the years, as set out in Table 3.6 of the Supp IA Report.[23]

A4. Protection to Transferring Policyholders

18.  The Petitioners describe the Coinsurance Agreements as an integral part buttressing the Scheme and is protected by the role played by the Authority in that:

(1) The Coinsurance Agreements cannot be amended and their terms cannot be waived except with the written agreement of both MPL and CLA BB. For any material change to the Coinsurance Agreements which will affect the interests of the Transferring Policyholders (except such changes that are required for legal, regulatory or compliance purposes), MPL and CLA BB will need to seek the Authority’s consent before making such change.[24]

(2) CLA BB only has the right to terminate the Coinsurance Agreements where (a) MPL fails to make any undisputed payment required under the Coinsurance Agreement(s); or (b) it becomes unlawful in any relevant jurisdiction for either party to perform its obligations under the Coinsurance Agreement(s); and (c) the Authority’s prior written consent is obtained, provided that the requirement shall not apply if such consent would require CLA BB to do anything or omit to do anything which would render it to be in breach of any applicable.[25]

19.  To reduce MPL’s counterparty risk vis-à-vis CLA BB as reinsurer and as suggested by the Authority, a trust agreement will be entered into between MPL (as beneficiary), CLA BB (as grantor) and Bank of New York Mellon (as trustee), whereby inter alia CLA BB will establish a segregated trust account for the participating Business (“Trust Agreement”):

(1) On the Transfer Date, CLA BB will deposit the Transferring Assets it receives (or assets of equivalent value) into such trust account as collateral[26].

(2) MPL will have direct access to the assets in the segregated trust account if (a) CLA BB fails to pay the settlement amounts in accordance with the Coinsurance Agreements, or (b) CLA BB becomes insolvent, or (c) the Coinsurance Agreements terminate.[27]

20.  To provide additional protection to MPL:[28]

(1) CLA BB has provided a letter of credit in favour of the Authority, with an initial amount of USD 21.482 million, which will be issued for a period of not less than 1 year and automatically extends for another year upon its expiry. The Authority is permitted to draw on the letter of credit if it opines that it is necessary to safeguard the interests of the Transferring Policyholders.[29]

(2) There are also assets held in CLA BB shareholders’ fund, which will be used to cover settlement amounts under the Coinsurance Agreements, in the event there are insufficient funds in CLA BB Long Term Funds or the segregated trust account under the Trust Agreement.[30]

A5. Exclusion of Unit Linked Assets

21.  CLL has issued unit-linked policies under which policyholders can opt to trade in a particular investment fund offered under the policies at a particular price. The Unit Linked Assets attributable to these unit-linked policies will not be transferred to CLA BB but will be retained by MPL. The reasons for carving out these unit-linked policies and Unit Linked Assets are said to be to reduce any risk of delays in trading, pricing and cash movements, so as to better align the short settlement timelines required by these activities.

22.  No trust will be set up over the Unit Linked Assets as the Petitioners consider that if a trustee is interposed, it will (1) take more time to effect the transactions; (2) increase the administrative expenses and transaction fees; (3) delay payments, fund pricing and trading, all of which will be detrimental to the policyholders. It is also uncertain if a trustee can effectively administer the trust assets which include dealings in GBP-denominated Unit Linked Assets.[31]

23.  The Petitioners say that the Unit Linked Assets will be retained by MPL on a “funds withheld basis” in that:

(1) MPL will open a new custody account (with Northern Trust Company) after the Proposed Transfer, and will have direct access to Unit Linked Assets.[32] MPL will have direct contractual relationship with the custodian holding these Unit Linked Assets.[33]

(2) The fair market value of the Unit Linked Assets will be treated as an account payable from MPL to CLA BB,[34] with a corresponding receivable for CLA BB.

(3) When MPL makes payment to a policyholder, CLA BB will make a matching reinsurance payment to MPL (achieving a set-off).[35] On this basis, it is said that the Unit Linked Assets are “indirectly held” by CLA BB.[36]

B. DISCUSSION

B1. Relevant principles

24.  The statutory framework governing transfer of long term business is set out in ss.24 to 25 of the Ordinance.

25.  Section 24(2) provides that the court shall not determine an application unless the petition is accompanied by a report from an independent actuary and the requirements of s.24(3) have been complied with. The requirements of s.24(3) are:

(1) Publication of the statutory notice (s.24(3)(a));

(2) Sending of the statutory statement (setting out the terms of the scheme, and a summary of the report of the independent actuary) to policyholders and every member of the insurers, except where the court has directed otherwise (s.24(3)(b));

(3) Service of the Petition, the report of the independent actuary and the statutory statement on the Authority at least 21 days before the determination of the petition (s.24(3)(c)); and

(4) Copies of the petition and the report of the independent actuary be open to inspection at the offices in Hong Kong of the insurers (or their representatives) not less than 21 days beginning with the date of the first publication of the statutory notice (s.24(3)(d)).

26.  If the aforesaid statutory conditions are complied with, the court may in its discretion sanction the scheme.

27.  The approach of the court in considering whether to sanction a scheme has been summarised in Re Blue Cross (Asia-Pacific) Limited [2022] HKCFI 2938 at §§11-12:

(1) The Ordinance confers an absolute discretion on the court whether to sanction a scheme, and the discretion must be exercised by giving due recognition to the commercial judgment entrusted by the company’s constitution to its directors.

(2) The court is concerned with whether a policyholder, employee or other interested person or any group of them will beadversely affected by the scheme.

(3) The above is primarily a matter of actuarial judgment involving a comparison of the security and reasonable expectations of policyholders without the scheme, with what would be the result if the scheme were to be implemented. The Ordinance assigns an important role to the independent actuary, to whose report the court will give close attention.

(4) The court will also pay close attention to any views expressed by the Authority, which is expected to be able to express informed opinions on whether policyholders would be adversely affected.

(5) The fundamental question is whether the scheme as a whole is fair as between the interests of the different classes of persons affected. It is not the court’s function to produce what is, in its view, the best possible scheme.

(6) That individual policyholders or groups thereof may be adversely affected does not mean the scheme has to be rejected. The details of the scheme are not a matter for the court provided that the whole scheme is found to be fair.

(7) The court will consider the contractual rights and reasonable expectations of transferring policyholders before the scheme is implemented, and compare that with the likely effect and result on such rights and expectations after the scheme is implemented especially where, as here, the purpose of the scheme is to advance a commercial purpose of the transferor (and transferee) with no corresponding benefit to the transferring policyholders.

28.  Section 25 of the Ordinance empowers the court to make provisions for the transfer to the transferee company of the undertaking, property and liabilities of the transferor company, the continuation by or against the transferee company of any legal proceedings pending by or against the transferor company and such incidental, consequential or supplementary matters as are necessary to secure that the scheme shall be fully and effectively carried out.

29.  At the sanction hearing, Mr Leung Yuk She, a Transferring Policyholder, opposes the Scheme on the following ground:

“…proposed scheme involving the ‘compulsory’ disposal / transference, i.e. ‘against [his] free will’, and on a ‘discriminatory’ basis, of [his] life insurance policy which has been in force for almost 40 years, (seemingly, along with some others which have been similarly ‘labelled) to a newly created off-shore corporation, totally unrelated to Canada Life itself, which indeed, is an unknown entity in the field of life insurance business”.

30.  Mr Leung’s “grievances” over the Scheme may be summarized as follows:

(1) He and his family members (who are beneficiaries of the policy concerned) are Canadian citizens, and he purchased the life insurance policy 40 years ago on the basis that the insurer, CLA, is a reputable insurance company in Canada, and they do not want the policy to be passed onto “an unknown entity in the field of life insurance”.

(2) He has enjoyed peace of mind and financial security provided by CLA in the past 40 years. He considers that peace of mind is the most important consideration and financial security only comes second.

(3) The implementation of the Scheme involves CLA acting in serious breach of its “contractual and moral obligations” owed to the Transferring Policyholders. It will also infringe his right over his personal data which he does not agree to be passed to the transferee.

(4) If the Scheme is implemented, it may attract “strong criticism” with consequential damage to CLA’s goodwill, as questions may be raised about CLA’s “drastic change” in business philosophy and strategy, its cashflow position and whether CLA is “downsizing” its operation.

B2. Compliance with statutory requirements

31.  As stated above, the first aspect which the court needs to be satisfied is compliance with statutory requirements stipulated in s.24 of the Ordinance and the Order. In the present case, each of the procedural requirement has been complied with.

32.  First, in compliance with s.24(2), the Petition is supported by the IA Report,[37] as supplemented by the Supp IA Report based on updated financial information as at 30 June 2025[38]. The IA also made an affirmation to set out the number of policies in force taking into account the number of deaths, surrenders and lapses as of 27 November 2025.[39]

33.  Second, in compliance with s.24(3)(a) and §1 of the order dated 18 September 2025 (“Order”), the statutory notice was published on 17 October 2025 in Gazette, and advertised in South China Morning Post and Hong Kong Economic Times.[40]

34.  Third, in compliance with s.24(3)(b) and §2 of the Order:

(1) The statutory statement[41] was sent to the shareholders of the Petitioners viz., Great-West Lifeco Inc. (sole shareholder of CLA), The Canada Life Group (U.K.) Limited (sole shareholder of CLL), and Asia Insurance Company, Limited and PACE Solutions Limited (shareholders of MPL).[42]

(2) The statutory statement was also sent to the Transferring Policyholders whose Transferring Policies (a) were in force; (b) had expired, terminated, matured or surrendered (but with claims/payments outstanding or a notice of claim has been received); and (c) which had lapsed for not more than 4 years, as at 31 July 2025, other than those who were uncontactable at their last known addresses.

(3) Although the Order provided for service by email, the statutory statement has not been sent by email as CLA and CLL do not have records of email addresses of Transferring Policyholders.[43]

(4) For those mails which were returned, CLA and CLL used reasonable endeavours to contact the relevant Transferring Policyholders by phone; by email addresses used in prior communications initiated by those policyholders and sending emails thereto; and conducting general online searches for any publicly available contact details. As of 18 November 2025, a total of 5 death claims were received and there were 54 and 12 uncontactable Transferring Policyholders of CLA and CLL respectively.[44]

(5) By §4 of the Order, the sending of the statutory statement to all other long term policyholders of CLA and CLL has been dispensed with.

(6) In compliance with §3 of the Order, CLL sent a UK Tax Insert to a Transferring Policyholder who, according to its records, was a UK tax resident as of 31 July 2025.[45]

35.  Fourth, in compliance with s.24(3)(c) and §§7, 11(1) of the Order, copies of the statutory statements, the Petition, the Scheme, IA Report and Supp IA Report were served on the Authority on 26 September 2025 and 18 November 2025.[46]

36.  Fifth, in compliance with s.24(3)(d) and §8 of the Order, copies of the statutory statements, the Petition, the Scheme, IA Report and the Order were made open for inspection at the office of the Petitioners’ solicitors for not less than 21 days from 17 October 2025.[47] No persons have inspected such documents.[48]

37.  In accordance with s.24(4) and §9 of the Order, the Petitioners were required to make available copies of relevant documents to any person who asks for the same. No person has asked for any such documents to be furnished.[49]

38.  As to §§10 and 11(2) of the Order, the Petitioners posted copies of the statutory statements, the Petition, the Scheme and IA Report on each of the Petitioners’ website on 17 October 2025, which post remains up to the conclusion of the substantive hearing of the Petition.[50] The Supp IA Report and the IA Aff were posted on the websites on 17 November 2025[51] and 4 December 2025 respectively.

B3. Issues relevant to exercise of discretion

39.  The Proposed Transfer is made for the purposes of allowing CLA and CLL to terminate their long term insurance business carried out in or from Hong Kong so that they can cease to be the insurers of the Transferring Policies, and be replaced by MPL.

40.  At the sanction hearing, Ms So submits that the net effect of the Scheme and the Coinsurance Agreements is that:

(1) Canada Life group (through CLA BB) is ultimately bearing the brunt of the liabilities of the Transferring Policies notwithstanding the Proposed Transfer.

(2) CLA BB is a branch and thus indistinguishable from CLA. CLA BB is required to hold the local Barbados capital requirements while CLA as a whole is required to hold the Canadian capital requirements (LICAT). CLA itself has demonstrated a robust solvency ratio over the years, as set out in Table 3.6 of the Supp IA Report.[52]

(3) As CLA BB will still be making the relevant payments to the Transferring Policyholders, it is vested with the assets attributable to the Transferring Policies and can make relevant investments to generate returns as required (save for Unit Linked Assets).

41.  While the above is the view taken by CLA and CLL, it does not address the question as to whether the Scheme is fair and whether the reasonable expectations, rights and interests of the Transferring Policyholders will be materially affected by the Proposed Transfer.

42.  This Court observes that in addition to the unusual and novel features involved in the Proposed Transfer (discussed in §§7, 10, 13-14 above), there are at least the following issues which need to be properly explained and addressed by the Petitioners:

(1) The reference to “Canada Life group” is only a convenient label used to describe the group of companies of which CLA is the ultimate holding company and is not a legal entity. The relevant question is which entity will assume the liabilities associated with the Transferring Policies, and whether that entity is in as good a position as CLA and CLL in honouring such liabilities.

(2) Under the Coinsurance Agreements, CLA BB will bear the liabilities associated with the Transferring Policies. It is not enough to say that because CLA BB is a branch such that it can or should be treated as CLA given that (a) CLA BB is subject to a different regulatory regime from that of CLA, and (b) the Petitioners must have decided to use CLA BB as the contracting party for a reason.

(3) The financial position of CLA BB, in particular the location of its assets and the regulatory regime to which it is subject, are all relevant matters which need to be explained so as to satisfy the court that the financial protection afforded to the Transferring Policyholders after the Proposed Transfer is similar to, and not worse than, the protection enjoyed by the Transferring Policyholders before the Proposed Transfer.

(4) Neither the Coinsurance Agreements nor the agreements constituting the Trust Agreement have been placed before the court. It appears from the descriptions in the IA Report that (a) the entire trust arrangement including the trustee and the trust account at which the Transferring Assets will be deposited will be located outside the jurisdiction of Hong Kong; (b) CLA BB only has beneficial interests in the Transferring Assets and the right to instruct the trustee to draw on and use the Transferring Assets in specified circumstances; and (c) MPL is said to have beneficial interests in the Transferring Assets, but the extent of such interests and their interplay with those enjoyed by CLA BB has not been explained. These are legal issues which the Petitioners have not addressed in their evidence. It is incumbent upon the Petitioners to demonstrate that such beneficial interests are as good as the legal rights currently enjoyed by CLA and CLL over the Transferring Assets.

(5) If and to the extent that the Coinsurance Agreements or the Trust Agreement contain governing law and forum selection clauses in favour of foreign law and foreign court, one would expect the Petitioners to explain, by reference to expert evidence on foreign law, that the Transferring Policyholders will not be materially affected by the change in governing law and forum. The issue of foreign law is not an issue which can be dealt with by the IA.

(6) The Authority will not have regulatory handle over CLA after implementation of the Proposed Transfer. It has not been explained why the contractual arrangements (i.e. Coinsurance Agreements and Trust Arrangement) and/or the regulatory regime in Canada and Barbados are proper substitutes of the Authority’s oversight over CLA, the entity which is going to bear the brunt of all the liabilities under the Transferring Policies.

(7) The precise arrangements (and the interplay between them) which will be put in place to ensure that MPL, the transferee which is supposed to have the primary responsibility and liabilities under the Transferring Policies but does not have any experience in insurance business or substantial assets required to carry on such business, will be in a good position to act as the insurer of the Transferring Policies.

(8) In respect of the “commitment” given by Asia Insurance and PACE to the Authority to the effect that if required, they will inject additional capital into MPL, whether it creates any legal obligation on their part to honour the commitment or whether it is only a gesture of goodwill, and how the Authority is going to enforce such “commitment”.

(9) Similarly, the letter of credit issued by MPL in favour of the Authority, whether it is enforceable by the Authority and how the Authority is going to enforce it for the protection of the Transferring Policyholders.

43.  It is not clear whether and to what extent the above issues have been considered by the Authority and, if so, the reasons they consider such issues have been sufficiently addressed.

44.  The Authority is the primary gatekeeper entrusted with the powers and duty to protect policyholders, and to ensure that a proposed transfer of long term insurance business is one which would not adversely affect or prejudice the rights and interests of the policyholders. This can be seen from the preamble, s.4A (functions of Authority) and s.4B (powers of Authority) of the Ordinance, each of which emphasizes the statutory role played by the Authority in regulating insurance business including long term business under Part IV of the Ordnance.

45.  Despite the importance of its role and the novel features involved in the Proposed Transfer (which took the application out of the ordinary category), the Authority does not provide any substantive or meaningful assistance to the court:

(1) Instead of identifying and drawing the court’s attention to issues and matters which may be relevant to the court’s consideration and providing its view on the issues, the Authority through counsel[53] only provides a very high level summary of (a) the fulfilment of the statutory requirements, (b) the opinion of the IA; (c) the opinion of the appointed actuaries; and (d) the enquiries and objections from the Transferring Policyholders, and states that the Authority has “no objection” to the application.

(2) With no disrespect to counsel for the Authority, the court derives no assistance from a very high level summary, particularly when counsel for the Petitioners already covers the same aspects in much greater details. When this Court raises the issues identified in §42 above and asks the view of the Authority, it is clear that counsel is not conversant with the Proposed Transfer and the underlying transactions, and unable to provide any meaningful assistance to the court. This is undesirable.

(3) Given the highly technical and complex nature of the Proposed Transfer, the court expects the Authority to assist and provide meaningful submissions and assistance on the issues and matters relevant to the application, particularly at the sanction hearing.

46.  As the issues relevant to the exercise of discretion in sanctioning the Scheme have not been properly addressed by the Petitioners and the Authority, the Petition has been adjourned until the Petitioners and the Authority are ready to address the issues raised by this Court.

B4. Adjourned sanction hearing

47.  On 5 January 2026:

(1) The Petitioners filed 3 further Affirmations made by the CEO of the Hong Kong branch of CLA (“Chang 3^rd”);the proposed CEO of MPL (“Huang 3^rd”); and the Petitioners’ solicitor exhibiting an opinion on New York law prepared by Clifford Chance US LLP (“Opinion”).

(2) The Authority filed an Affirmation of Chan Shuen Shuen (“Chan 1^st”) setting out the bases for the Authority to come to the view that it “has no objection to the Scheme”.

(3) On 28 January 2026, the IA filed a 2^nd Affirmation confirming his opinions and conclusions as set out in his previous Affirmation and Reports.

48.  At the adjourned hearing, Mr Victor Dawes SC (leading Ms So) appear for the Petitioners while Mr Jeffrey Chau (with Ms Lau) appear for the Authority.

B4.1 Coinsurance Agreements treated as reinsurance?

49.  Both Mr Dawes and Mr Chau treat the Coinsurance Agreements as reinsurance and emphasise that it is very common and, indeed, necessary for insurers to enter into reinsurance arrangements.

50.  Mr Chau submits that reinsurance arrangements are fundamental and prevalent in the global insurance industry for achieving risk diversification. The way MPL cedes its business (and assets) to a reinsurer outside Hong Kong is therefore not unusual.[54]

51.  Similarly, Mr Dawes submits that:

(1) The starting point is that reinsurance arrangements by insurers within the global insurance industry (where inter alia assets supporting the policies to be reinsured are transferred to reinsurers as reinsurance premiums) are common practices for risk management and diversification purposes.[55]

(2) This is confirmed by the Authority, which points out that authorized insurers in Hong Kong will cede businesses to overseas reinsurers to manage exposure and spread risk.[56]

52.  Both counsel refer to s.8 of the Ordinance to underscore the importance of reinsurance in this way:

(1) Section 8 governs the Authority’s approach in determining an application made by a company under s.7 of the Ordinance for authorization to carry on any specified class(es) of insurance business in Hong Kong.

(2) Under s.8(2)-(3) of the Ordinance, the Authority must not authorize a company unless, amongst other things, it is satisfied that the company’s (in this case MPL’s) directors and controllers are fit and proper to hold the positions in question, and the conditions specified in s.8(3) of the Ordinance are satisfied.

(3) In particular, s.8(3)(c) provides that the Authority must not grant authorization unless it is satisfied that the prospective insurer in question has made or will make “adequate arrangements… for the reinsurance of risks” of each of the classes of insurance business that it proposes to carry on; and that prospective insurers are only exempted from this condition if and only if it can be demonstrated to the Authority that “it is justifiable not to make arrangements for that purpose” (s.8(3)(c)(ii)) [57].

(4) In other words, not putting in place any reinsurance arrangements is an exception, rather than the norm. The fact that MPL intends to reinsure the Business with CLA BB (an overseas reinsurer) in itself is not unusual or concerning.

(5) The adequacy of MPL’s Coinsurance Agreements (and the legal arrangements relating thereto) was in fact one of the Authority’s key considerations in MPL’s application (and approval-in-principle granted) for authorization to carry on long term business.

53.  While those involved in insurance business may regard the substance of the Coinsurance Agreements as identical to that of reinsurance, as a matter of law, they are not the same. This can be seen from the passage in Robert Merkin QC, Colinvaux’s Law of Insurance in Hong Kong, 4^th ed., 2021, §15.001 cited by Mr Chau, where the learned editor describes reinsurance in this way:

“Reinsurance has been defined as the insurance of insurers. It is in essence a contract of insurance under which the insurer takes out cover on its own risk. The notion underlying reinsurance is the need to lay off part of the risk undertaken, and reinsurance is a means whereby the original (or direct) insurer can spread that risk amongst other insurers both nationally and internationally, thereby reducing its own exposure and losses on business written. Reinsurance thus allows an insurer to expand its own portfolio of cover and also reduces the risk that the insurer will not be able to meet claims. An agreement is made between the direct insurer (sometimes called the ‘ceding company’ or the ‘reinsured’) and the reinsurers whereby the former agrees to cede and the latter to accept a certain share of the direct risk on the terms there set out. Reinsurers may reinsure their own liabilities, such contracts being referred to as retrocessions. A direct insurer may also be a reinsurer of the risks of other insurers while some companies transact nothing but reinsurance business (‘pure’ reinsurers).”

54.  In the absence of any authority cited by counsel in support of their contention, I am unable to accept that the Coinsurance Agreements are or should be treated as reinsurance.

55.  This notwithstanding, as Mr Dawes accepts, the key question is whether the various arrangements put in place for the purpose of Proposed Transfer are adequate to protect the Transferring Policyholders and to ensure that their interests will not be materially affected. This, in turn, requires the Petitioners to address the issues discussed in §42 above, and the Authority to state its view on the issues to the extent that it was involved in and agreed to the arrangements.

B4.2 MPL as authorised insurer / transferee

56.  Mr Chau submits that in assessing and granting approval-in-principle on 25 August 2025 to MPL to carry on long term business, the Authority considered the Coinsurance Agreements (and the legal arrangements relating thereto) as one of the key considerations[58]. In this regard:

(1) The Authority has exercised particular scrutiny to ensure that adequate protections have been put in place to safeguard the interests of the Transferring Policyholders after the Proposed Transfer[59].

(2) The Authority took into account[60]:

(a) the financial strength of CLA (being the proposed reinsurer) – CLA has a credit rating of AA by Standard & Poor’s, which means a very strong capacity to meet financial commitments[61];

(b) the financial strength of Asia Insurance and PACE[62], and their willingness and financial capacity to maintain the financial soundness of MPL by providing letters of undertaking to the Authority. As Asia Insurance is an authorized insurer, any non-compliance to fulfil its undertaking may adversely affect its capability to carry on insurance business in or from Hong Kong and may trigger follow-up actions being taken against it by the Authority[63]; and

(c) the extent to which MPL will have control over the Relevant Transferring Assets that back the liabilities of CLA BB under the Coinsurance Agreements in the event that CLA BB fails to honour its obligations to MPL (as the cedent) and pay under the reinsured Transferring Policies. The Authority is satisfied that adequate safeguards are put in place to protect the interests of the Transferring Policyholders in respect of each of the 3 categories of Relevant Transferring Assets (see §§57-60 below).

57.  The 3 categories of Relevant Transferring Assets (and the corresponding liabilities of CLA BB under the Coinsurance Agreements) are[64]:

(1) Those that back the liabilities under the participating Transferring Policies (“Participating Transferring Assets”);

(2) The Unit Linked Assetswhich back the liabilities under the unit linked policies of CLL HK (“Unit Linked Transferring Policies”); and

(3) Those that back the remaining liabilities under the Transferring Policies that are non-linked and non-participating (“NLNP Transferring Assets”).

58.  As regards the Participating Transferring Assets:

(1) The Participating Transferring Assets (or assets of equivalent value) will be held in a segregated trust account pursuant to the Trust Agreement, such that they will be ring-fenced for the benefit of MPL and the Transferring Policyholders of the participating Transferring Policies. This significantly reduces MPL’s counterparty risk vis-à-vis CLA BB as it ensures that MPL, being a party to the Trust Agreement, has direct access to, and can withdraw, the trust assets in the event that CLA BB fails to honour its obligations to MPL (as cedent) under the relevant Coinsurance Agreement, or becomes insolvent or the relevant Coinsurance Agreement terminates[65].

(2) The Participating Coinsurance Agreement requires CLA BB to continue applying the Closed Block Operating Rules (“CBOR”) to the Participating Transferring Assets. No change can be made to CBOR without the written consent of MPL, CLA BB (if required) the Office of the Superintendent of Financial Institutions of Canada (“OSFI”) and the Authority[66]. This ensures that CLA BB can only make withdrawal in pre-determined situations (and not for its own benefit) even if there are excess assets. If the assets managed under CBOR fall below the liabilities for guaranteed benefits of the relevant participating policies, CLA BB will be obliged to make good the shortfall[67]. The investment strategy for the closed block will remain consistent with that adopted by CLA prior to the Proposed Transfer[68]. The continual application of CBOR to the Participating Transferring Assets is designed to ensure continuity in the benefit expectations and financial security of the Transferring Policyholders after the Proposed Transfer.

59.  As for the Unit Linked Assets, this has been sufficiently addressed by Ms So at the sanction hearing (see §§21-23 above). MPL has direct access to and control over the Unit Linked Assets. This militates against any counterparty default risk on the part of CLA BB.

60.  In respect of the NLNP Transferring Assets:

(1) Although they will not be held by MPL, CLA BB will provide and maintain an irrevocable and unconditional letter of credit, with the Authority as sole beneficiary at USD 21.482 million, which the Authority can draw if it opines that this is required to safeguard the interests of the Transferring Policyholders[69].

(2) The size of the letter of credit is designed at a level sufficient to support the liabilities of the non-linked and non-participating Business (~USD 2.94 million), with an additional buffer of USD 18.542 million[70] to support other relevant Transferring Liabilities.

61.  Mr Dawes submits that MPL is further protected by the Trust Agreement in that:

(1) MPL is a beneficiary under the Trust Agreement, with a right to directly request for withdrawal of assets in the trust account as necessary, to satisfy any payment due from CLA BB under the Coinsurance Agreements in the unlikely event CLA BB fails to do so within 5 business days of notice of such default from MPL.[71] Thus, if CLA BB defaults payment, MPL will be able to directly access and claim the trust assets.

(2) MPL’s rights under the Trust Agreement, which is governed by New York law, have been considered and explained in the Opinion:

(a) The Trust Agreement obliges the trustee to take all steps necessary to transfer absolutely and unequivocally all right, title and interest in assets in the trust account to MPL (including to deliver physical custody of the same to MPL). The trustee is further entitled to rely conclusively and exclusively upon MPL’s withdrawal notice (p.5).

(b) To facilitate this, the Trust Agreement requires CLA BB to execute documents in blank or to transfer legal title to the trustee so that MPL (or the trustee at MPL’s direction) can negotiate/transfer the trust assets if necessary, without further consent from CLA BB (pp. 5-6).

(c) MPL is a party to the Trust Agreement and the beneficiary of the trust. It will thus be able to directly withdraw assets as discussed above (in contrast to an arrangement where the trustee acts as a representative for beneficiaries, and is the only party entitled to enforce rights on behalf of the class) (p. 6).

(d) The above means that if CLA BB became insolvent, the trust assets would be ring-fenced to satisfy CLA BB’s obligations under the Coinsurance Agreements vis-à-vis MPL, to the exclusion of CLA BB’s other creditors. The effect of such trust under New York law is to remove the trust property from CLA BB’s insolvency estate (pp. 6-7).

62.  On the basis of the above evidence and explanations, I am satisfied that sufficient arrangements have been put in place to protect the financial security of the Transferring Policyholders, and ensure that they will not be adversely affected by the Proposed Transfer of the Business to MPL.

B4.3 CLA BB’s obligations to pay under Transferring Policies

63.  Mr Dawes submits that CLA BB has the ability and is bound to honour its obligations to MPL and pay under the Transferring Policies, and there are adequate safeguards to ensure that CLA BB’s assets will be applied to honour its obligations to MPL and pay under the Transferring Policies, for the following reasons.

64.  First, CLA BB is a well-established international reinsurer. It is a branch of CLA which has a strong credit rating of AA from Standard & Poor’s (and is not a separate legal entity). CLA BB is regulated in both Canada (via CLA’s overall supervision) and in Barbados.[72]

65.  Second, the Participating Coinsurance Agreement requires CLA BB to continue applying the CBOR to the assets supporting the participating Transferring Policies. In other words, CLA BB can only make withdrawal in pre-determined situations (and not for its own benefit), and if the assets managed under such rules fall below the amount of liabilities for the guaranteed benefits of the relevant participating policies, CLA BB will have an obligation to make good the shortfall.[73]

66.  Third, the investment strategy and activities for the assets supporting the participating Transferring Policies will continue to be subject to the governance and oversight exercised by Canada Life International Participating Management Committee, and will not be changed after implementation of the Scheme and the Coinsurance Agreements.

67.  Fourth, the Trust Agreement is an important aspect which the Authority has also taken into account when concluding that there has been adequate protection for the financial security and other benefits of Transferring Policyholders.[74]

68.  Fifth, CLA BB’s letter(s) of credit in favour of the Authority is a further safety measure providing additional safeguard to the interests of Transferring Policyholders.[75]

69.  Mr Chau refers to the Authority’s comparison of the differences between the positions before and after the Proposed Transfer[76] in support of its view that there will not be any material adverse impact on the interests of the Transferring Policyholders, particularly since MPL’s insurance risks and liabilities under the Transferring Policies are ceded (back) to CLA BB, which is the same legal entity as CLA. Hence, CLA will remain the ultimate party that will be making payments under the Transferring Policies even after the Proposed Transfer.

70.  I accept that for the reasons submitted by Mr Dawes and Mr Chau, there is no material change in the financial security of the Transferring Policyholders before and after the Proposed Transfer, given that the insurance risks and liabilities under the Transferring Policies assumed by MPL will be ceded back to CLA BB, a Barbados branch of CLA and the same ultimate party who will be making payments under the Transferring Policies in the ordinary course.[77]

B4.4 Authority’s regulatory handle

71.  A material difference before and after implementation of the Proposed Transfer is that CLL and CLA, the entity which is going to bear the liabilities of the Transferring Policies, will cease to be subject to the Authority’s regulatory oversight as it will cease to be an authorised insurer in Hong Kong.

72.  Mr Chau submits that the lack of oversight by the Authority over CLA (and CLL) will not materially prejudice the interests of the Transferring Policyholders for the following reasons:

(1) MPL is backed by its shareholders, and its majority shareholder (Asia Insurance) is an authorized insurer in Hong Kong. The Authority will have a further regulatory handle to monitor and police the Scheme through Asia Insurance, particularly in light of the undertakings given by Asia Insurance. Non-compliance with the undertakings will influence the Authority’s determination and assessment of the fitness and propriety of Asia Insurance (or its controllers, directors and key persons in control) which, in turn, will affect its ability to carry on insurance business in or from Hong Kong[78].

(2) While CLA will no longer be subject to the Authority’s direct regulation after withdrawal of its authorization as an insurer in Hong Kong, it remains subject to the group-wide supervision of OSFI in Canada. As both the Authority and the OSFI are signatories to the Multilateral Memorandum of Understanding on Cooperation and Information Exchange (“MMOU”) administered by the International Association of Insurance Supervisors (“IAIS”), being a global standard-setting body responsible for developing and assisting in the implementation of principles, standards and guidance for the supervision of the insurance sector. The Authority will be in a position to invoke assistance from the OSFI under the MMOU if it considers such invocation of assistance to be necessary for the protection of policyholders[79].

(3) The Authority can draw on the letter of credit provided by CLA BB should it become necessary to do so.

(4) MPL, being an authorized insurer, will be required to ensure that its capital base is not less than the statutory prescribed and minimum capital amounts at all times[80]. MPL has to submit monthly, quarterly and annual returns to the Authority on its capital adequacy and financial position.

(5) The Authority has intervention powers under ss.26 and 35 of the Ordinance which it may exercise over MPL including appointment of a Manager to manage an authorized insurer’s affairs, business and property for a specified period of time if the exercise of such powers is desirable for the protection of the Transferring Policyholders.

73.  With the explanations provided by the Authority in particular, its ability to invoke assistance from OSFI under the MMOU if necessary for the protection of the Transferring Policyholders, this Court is satisfied that implementation of the Proposed Transfer will not have material adverse effect on the reasonable expectations and financial security of the Transferring Policyholders.

B4.5 Location of Transferring Assets

74.  Mr Dawes submits that there is no material change in the localities of the Transferring Assets before and after the Proposed Transfer given that:

(1) The Transferring Assets are invested in bonds or other fixed income instruments/securities in the US, Canada and Europe, and safe-kept in the US (save for a small amount in cash and bank balances kept in Hong Kong for settlement of benefit payments). On the other hand, the Unit Linked Assets are held in the UK domiciled investment funds.[81]

(2) Many of these assets currently underlying the Transferring Policies have never been based in Hong Kong while under the management of CLA or CLL.

(3) Thus, there will be no change in the localities of the Relevant Transferring Assets after implementation of the Proposed Transfer.

75.  Taking into account the additional evidence and explanations provided by the Petitioners, I accept that there will be no change in the localities of the Transferring Assets before and after the Proposed Transfer, such that the interests of the Transferring Policyholders will not be affected.

B4.6 Objections raised by Mr Leung

76.  While it is understandable that Mr Leung does not agree with the Proposed Transfer, the grievances advanced by him do not go anywhere near to show that implementation of the Scheme will materially affect his reasonable expectations and financial security currently enjoyed under the policy or that the Scheme is unfair as between the interests of the different classes of persons affected. I do not think that his objection poses a hurdle to the court sanctioning the Scheme.

77.  The court makes an order in the terms set out in the Annex hereto.

Annex

UPON the Petitioners’ undertaking to abide by the Scheme hereinafter sanctioned and to execute all such documents and do all such acts and things as may be necessary or expedient to be executed or done by them for the purposes of giving effect to the Scheme;

AND UPON CLA’s undertaking to issue an irrevocable letter of credit to the Authority, as described in paragraph 22 of the Supplemental Skeleton Submissions for the Authority, upon the Scheme taking effect;

AND UPON the undertaking given by Asia Insurance and PACE as per their letters dated respectively 16 and 22 September 2025.

IT IS ORDERED that:

(1) The Scheme be sanctioned;

(2) Pursuant to Section 25 of the Ordinance, all other contracts, rights, obligations and commitments of CLA and CLL with respect to the Transferring Policies and the Business or otherwise relating to its undertaking, property or liabilities as specified in the Scheme shall, on and from the Transfer Date, be transferred and vested in MPL;

(3) The Petitioners shall post the Order, the Petition, the Scheme, the IA Report, the Supp IA Report, the Independent Actuary's Affirmations filed on 3 December 2025 and 28 January 2026, and this Order on the website of MPL at www.mypace.life, the website of CLA at www.canadaliffe.com/hongkong-portfolio-transfer and the website of CLL at www.canadalife.co.uk/transfferring-policies-to-my-pace-life, and maintain that posting until the Transfer Date;

(4) There be liberty to apply for the purpose of modification of the Scheme under Clause 13 of the Scheme or the purposes set out in Section 25 of the Ordinance; and

(5) The Petitioners do pay the costs of the Insurance Authority in relation to the Petition, to be taxed on a common fund basis if not agreed.