Possibility of pledging an insurance portfolio (assurantieportefeuille) under Dutch law

Is it possible to pledge an insurance portfolio (assurantie portefeuille) under Dutch law?

Supreme Court 6 December 2019, ECLI:NL:HR:2019:1909

This Supreme Court judgment relates to the question whether an insurance portfolio (assurantieportefeuille) can be validly pledged under Dutch law. ING (as lender) and a general partnership (vennootschap onder firma, the VOF) (as borrower) entered into a credit agreement, which credit agreement also entailed a deed of pledge and which was registered on 16 July 2007. The credit agreement includes the following wording: “As security for all that the borrower owes or becomes indebted to the lender, the borrower hereby pledges, to the extent necessary in advance, to the lender, who accepts this right of pledge, all current and future Company Assets as described [in] the General Provisions of Pledge, to the extent not previously pledged to the lender. These Company Assets include (but are not limited to) the Company Equipment, Credits, Receivables and Stocks belonging to the borrower's business. The Borrower also undertakes to pledge to the Lender all his future claims that it will obtain against third parties - for whatever reason or on whatever ground - from legal relationships that do not yet exist at the time of this pledge." In addition, the General Provisions of Pledge apply to the credit agreement, which include the following wording: "Article 1 Definitions (…) e. Company Assets: all goods belonging to the business of the Pledgor including but not limited to the Company Equipment, Credits, Receivables and Stocks including: (I) client files and the data carriers on which they are kept; and (II) goodwill, being the capital gain of the company in excess of the sum of fixed assets;" In the end, the VOF was declared bankrupt and the bankruptcy trustee sold, among other things, the insurance portfolio of the VOF and the related goodwill to a third party. In these proceedings, ING claims a declaratory decision that it has obtained a valid right pledge on the insurance portfolio of the VOF and also claims payment of the proceeds that the bankruptcy trustee has realized with the sale of that insurance portfolio (up to a maximum equal to ING's outstanding claim under the credit agreement). The court has rejected ING's claims and the parties have subsequently agreed to skip the appeal at the Court of Appeal and to file for an appeal at the Supreme Court instead.

Conclusion Dutch Supreme Court

The Supreme Court states that the concept of an ‘insurance portfolio’ as such is not defined in law and has no fixed meaning, but that in this case (now that this conclusion of the district court) has not been contested by the parties) the term ‘insurance portfolio’ means (i) all cooperation agreements that an insurance broker has concluded with insurers, (ii) the contracts that this insurance broker has concluded with its clients, and (iii) the goodwill consisting of the expected insurance contracts that the clients will conclude in the future through this insurance broker. In addition, the Supreme Court states that such an insurance portfolio can only be pledged if the insurance portfolio can be regarded as a good (goed), being a movable property (zaak) or a property right (vermogensrecht). According to the Supreme Court, the Dutch legal system assumes that only individual movable property or property rights can qualify as a good and, as such, can be pledged. As the insurance portfolio is not an individual movable property nor an individual property right, the insurance portfolio is not a good and therefore cannot be pledged. According to the Supreme Court, the fact that an insurance portfolio is regarded as an individual item in the course of trade, represents a certain economic value and can be sold (under the laws of obligations (verbintenisrechtelijk)) does not mean that an insurance portfolio can also be transferred or pledged under property law (goederenrechtelijk). The fact that other legislation (the Financial Supervision Act (Wet op het financieel toezicht)) makes reference to the transfer of a portfolio from a broker, also does not result in the Supreme Court deciding otherwise as the aforementioned legislation does not provide for a transfer under property law. Lastly, the Supreme Court also states that the argument that, in practice, it is desired that it is possible for parties to pledge an insurance portfolio as this improves the financeability of insurance brokers and that is common practice that insurance portfolios are already used as collateral, is invalid. Consequently, if insurance portfolios are to be used as collateral, parties should pledge the individual goods of which such an insurance portfolio consists.

Questions?

The experts of Ploum have extensive experience with establishing rights of pledge. On a daily basis, we advise and assist parties that establish rights of pledge or that wish to execute such rights. In case of questions in relation to rights of pledge, please feel free to contact one of our experts.